E 21-7 Enterprise fund journal entries and reporting Prepare journal entries to record the following grant-related transactions of an enterprise fund activity. Explain how these transactions should be reported in the enterprise fund’s financial statements, including the statement of cash flows.

1. Received an operating grant in cash from the state, $3,000,000.

2. Incurred qualifying expenses on the grant program, $1,200,000.

3. Received a federal grant to finance construction of a processing plant, $7,000,000. (The cash was received in advance.)

4. Incurred and paid construction costs on the processing plant, $4,000,000.