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PINKCPA
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Posted: 30 Sep 2010 at 02:08 | IP Logged  

Ok, please help me understand what gives between the two questions below. One is from Becker, the other is from Gleim. (I have used Gleim for studying but I am doing Becker's Final Review). I don't understand why the Becker answer isn't $4M.

Becker

Nadaf received $4M in tuition revenue for the year ended Dec 31, X1. In addition to the tuition received, the university offered $500,000 in scholarships but had to refund $200,000 for cancelled classes.  For the year ended December 31, 20X1, Nadaf would record gross revenue for tuition of:

 

Gross Revenue is computed as:

 

Tuition-4M

Scholarship-500

Refunds- (200)

Total -4.3

 

Gleim

 

Ames assessed it students $3M for tuition and fees. The net amount realized was only $2.5M because scholarships of 400K were granted to students and tuition remissions of 100K were allowed to faculty members. These amounts were properly classified as expenses. What should Ames report for the period as revenue for tuition and fees?

 

B) 3M- given that scholarships and tuition remissions were expenses, revenue should be reported at gross.

Thanks,

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FARleft
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Posted: 30 Sep 2010 at 12:29 | IP Logged  

PINKCPA, I am using Becker. the answer to the Becker question is Total fees collected including Scholarship (F9-66) are revenues, all refunds (cancelled classes) are deducted from all sums collected. The fees for cancelled classes are unearned (liability) so the school must give it back. (they gave back the money).

Gleim's question has no refund, cancelled classes=(refund). However the scholarship and faculty members tuition remissions are treated as collection of revenue. So in Gleim's case all amount are revenue.

Eventhough Scholarships and tuition remissions are considered as reduction (expenses), you should look at it from this point. They gave you the funds for scholarship and tuition remission and then you inturn buy their educational services, therefore it is revenue.

Hope this helps.
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PINKCPA
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Posted: 02 Oct 2010 at 15:06 | IP Logged  

Thanks FARLEFT! It now makes sense.

Gleim- gave me total revenue

Becker- gave me tuition revenue plus additional revenue/unearned revenue. We deduct the cancelled classes because it is unearned. Whereas, if it would have been an expense (i.e.books)..it wouldn't have been a deduction from revenue.

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