Centralia City received notification on May 1 that it has been approved for a $300,000 federal operating grant. The grant is payable on a reimbursement basis as the city expends resources for the intended purposes of the grant. No expenditures have been made for grant purposes as of May 1. The journal entry to record approval of this grant will include:

1. A credit to Revenues in the amount of $300,000
2. A credit to Deferred Revenues in the amount of $300,000
3. A debit to Grants Receivable in the amount of $300,000
4. No journal entry will be made until eligibility requirements are met by expending resources for the authorized purpose(s).