Columbus City was awarded a state grant of $150,000 to assist its adult literacy program. The following were significant events relating to the grant:
? The city, which is on a calendar year, was notified of the award in November 2007.
? During 2008 it expended $30,000 on the literacy program and was reimbursed for $20,000. It expected to receive the balance in January 2009.
? In 2009 it expended the remaining $120,000 and was reimbursed by the state for the $10,000 owing from 2008 and the amount spent in 2009.
1. Prepare journal entries to record the events.
2. Suppose the city received the entire reimbursement in advance, at the time the award was announced in 2007.
3. Suppose alternatively that 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 2007. How much revenue should the city recognize in each of the three years? Explain
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Below are my answers.
No entry on notification
DR: Expense account $30,000
CR: Account payable or cash $30,000
DR: Cash $20,000
CR: Grant ...
Grants which are not necessarily recognized as revenues when awarded.