Grants are not necessarily recognized as revenue when
they are awarded.
Columbus City was awarded a state reimbursement
grant of $150,000 to assist its adult
literacy program. The following were significant
events relating to the grant:
a. The city, which is on a calendar year, was
notified of the award in November 2012.
b. During 2013 it expended $30,000 on the
literacy program and was reimbursed for
$20,000. It expected to receive the balance
in January 2014.
c. In 2014 it expended the remaining
$120,000 and was reimbursed by the state
for the $10,000 owing from 2013 and the
amount spent in 2014.
1. Prepare journal entries to record the events in
a governmental fund.
2. Suppose instead that the city received the
entire $150,000 in cash at the time the award
was announced in 2012. How much revenue
should the city recognize in its governmental
fund statements in each of the three years?
Explain.
3. Suppose that, instead of a reimbursement
grant, the state awarded the city an unrestricted
grant of $150,000, which the city
elected to use to support the adult literacy
program. The city received the entire
$150,000 in cash at the time the award was
announced in 2012. How much revenue
should the city recognize in its governmental
fund statements in each of the three years?
Explain.
4. Assume the same facts as for questions 1, 2,
and 3. How much revenue should the city
recognize in its government-wide statements
for each of the three years? Explain.