Manor County was awarded a state grant to establish evening athletic programs for at-risk youth. The $3.6 million award, to cover the calendar year 2015, was announced on November 15, 2014.
According to the terms of the grant, the county will be reimbursed for all qualifying costs within 30 days of its filing an appropriate request-for-reimbursement form.
During 2015 the county incurred $300,000 of costs each month. It filed a reimbursement claim shortly after the end of each month and received are imbursement check approximately 45 days after the end of the month in which it incurred the costs. Hence, it received 12 checks, the first on March 15, 2015, and the last on February 15, 2016. The county operates on a fiscal year beginning October 1.
1. Prepare journal entries to summarize the county’s grant-related activity for its fiscal year ending September 30, 2015 on a modified accrual basis.
2. Suppose alternatively that the state would reimburse the county for its costs in four installments, the first on June 30, 2015, and the last on March 31, 2016. Do you think that the county, in its fund financial statements, should recognize the reimbursement of December 31, 2015, as revenue of the county’s fiscal year ending September 30, 2015? Justify your answer.