2) Complete the following tasks for each revenue transaction. Your journal entries will be graded for accuracy and completion of the following criteria as applicable:

a) Use updated Codification Subtopic 958-605 or ASU 2018-08 to determine if each transaction is an exchange or non-exchange transaction. Justify your decision. i) For each exchange transaction, use the revenue recognition standard (Topic 606-05) to determine the appropriate accounting treatment. Specifically:

(1) Document your evaluation of the five steps in the revenue recognition standard.

(2) Record the appropriate journal entry H2O should have recorded when the company received notification of the original transaction (or state no entry). (3) Record the appropriate end of the year journal entry to reflect changes that happened after the notification of the transaction and on or before 6/30/2019 (or state no entry).

ii) For each nonexchange transaction.

(1) Determine if the nonexchange transaction is conditional or unconditional. Explain your reasoning.

(2) Determine if the transaction includes a donor-imposed restriction or does not include a donorimposed restriction. Explain your reasoning.

(3) Record the appropriate journal entry that H2O should have recorded when the company received notification of the original transaction (or state no entry).

(4) Record the appropriate end of the year journal entry to reflect changes that happened after the notification of the transaction and on or before 6/30/2019 (or state no entry). [You do not need to record an entry to reclassify net assets when restrictions are met.]

FACT PATTERN

H2O Kindness has asked the board to help research each of these transactions that occurred during the year and determine how they should be reported during the 6/30/2019 fiscal year. Unless otherwise noted, no entries related to these transactions have been previously recorded.

1. H2O Kindness received the following grants during fiscal year 2019:

a. H2O Kindness received a $2,000,000 grant from the Environmental Protection Agency (EPA). The grant monies must be used to support well development research. H2O Kindness is required to submit a research summary document to the EPA. H2O Kindness owns any and all research results. As of 6/30/2019, H2O Kindness has completed about 75% of the research study. In addition, H2O has spent 75% of the funds on qualifying expenses. The studys expected completion date is December 2019. While research is part of H2O Kindnesss mission, their research budget was only $400,000 before this grant. All monies not used for qualifying expenses must be refunded to the EPA. (All related expenses have been correctly recorded.)

b. H2O Kindness received notification of a refundable $800,000 grant from a US Public School District. The school districts state recently reported high levels of lead in the public water supply. The grant monies must be used to install 50 lead filtration systems in the districts public schools. As of 6/30/2019, H2O Kindness has spent $240,000 on qualifying expenses and received reimbursement for $200,000. H2O Kindness has installed 15 of the 50 filtration systems. The remaining filtration systems will be installed during the 2020 fiscal year. (All related expenses have been recorded.)

c. On 6/1/2019, H2O Kindness received a $200,000 grant from a Private Foundation. The grant specifies that monies must be used to build new water wells in at least four underdeveloped communities in South America. As of 6/30/2019, H2O Kindness has installed three wells in qualifying communities. The remaining well will be installed in July 2019. H2O typically installs over 40 new wells a year. At the completion of the project, the Foundation requires H2O Kindness to submit a report detailing the monies spent and providing specific information about each of the four locations. H2O Kindness must return all grant monies if it does not build four new water wells in qualifying communities. The private foundation does not receive any direct or indirect benefit from the wells. (All related expenses have been recorded.)