Question

Tuition and fees for Northern University were assessed at $22,000,000. $ 1,600,000 of the amount due from students was later reduced by need based scholarships. Graduate assistantships and work-study stipends reduced the amounts collectible from student by an additional $ 1,000,000.What is the journal entry to record the scholarship allowances?

Answer 1

To record scholarship allowances at Northern University, you would debit Scholarship Allowance for $1,600,000 and credit Tuition and Fees Revenue by the same amount. Graduate assistantships and work-study reductions are recorded similarly.

Step-by-step explanation:

To record the scholarship allowances provided by Northern University, in accounting terms, we would need to make a journal entry that acknowledges the reduction in tuition and fees revenue as a result of these scholarships. The total amount of need-based scholarships comes to $1,600,000. This amount is considered a reduction in revenue and not an expense, therefore the journal entry would be a debit to the Scholarship Allowance account (increasing this contra-revenue account) and a credit to the Tuition and Fees Revenues account, decreasing the revenue reported. The graduate assistantships and work-study stipends would be recorded in a similar manner if they directly reduce the revenue from tuition and fees. The journal entry would look like this:

• Debit Scholarship Allowance $1,600,000
• Credit Tuition and Fees Revenue $1,600,000

The recording of graduate assistantships and work-study stipends as an additional $1,000,000 reduction would be separate and show:

• Debit Scholarship Allowance $1,000,000
• Credit Tuition and Fees Revenue $1,000,000