Eastern University had the following transactions at the beg

Eastern University had the following transactions at the beginning of its academic year:

Student tuition and fees were billed in the amount of $7,000,000. Of that amount, $4,500,000 was collected in cash.

Pell Grants in the amount of $2,000,000 were received by the university.

The Pell Grants were applied to student accounts.

Student scholarships, for which no services were required, amounted to $450,000. These were applied to student tuition bills at the beginning of each semester.

Required:
Prepare journal entries to record the above transactions assuming:
a. Eastern University is a public university.
b. Eastern University is a private university.

Solution

Answer: (a)

Journal Entry When Eastern University is Public University.

1. Cash   A/c      dr.                                  4500000

   Account receivable A/c dr.                     2500000

             To Tuition Income   A/c                  7000000

(Being tuition income recorded in the books of Account)

2. Cash A/c   Dr.                                    2000000

          To Revenue-grants A/c                   2000000

(Being grants Received)

3. Student Scholarship A/c    Dr.               450000

              To, Account Receivable A/c         450000

(Being student scholarship adjusted with Tuition Fees)

4. Tuition Income   A/c           dr.                7000000

    Grants   A/c                      dr.               2000000

                   To Profit and Loss A/c           9000000

(Being income recognized in Profit and Loss A/c)

5. Profit and loss A/c       dr.                      450000

              To Scholarship A/c                        450000

(Being Expenses recognized in P/L accounts)

Answer: (b)

When Eastern University is Private University

1.    Cash A/c              dr.             4500000

       Account receivable A/c dr.   2050000 (7000000-450000)

                   To Tuition Income A/c 7000000

(Being Net Tuition income recorded in the books)

2.    Cash A/c      dr.                2000000

          To Revenue-grants A/c   2000000

(Being Grants Received)

3. Tuition Income A/c    dr.      7000000

   Revenue-Grants A/c   dr.     2000000

         To P/L A/c                  9000000

(Being Income recorded in the P/L Account)