26. On May 1, the City of Dusti payable on a reimbursement bas grant. As of May

Question

26. On May 1, the City of Dusti payable on a reimbursement bas grant. As of May 1, no expenditures had been made for gran record approval of this grant will include: A) A credit to Revenues in the amount of $300,000. B) A credit to Deferred Resources- Grant C) n was notified of approval of a $300,000 federal operating grant, IS s the city expends resources for the intended purpose of the nflows of Resources Grant Proceeds in the amount of $300,000. debit to Grants Receivable in the amount of $300.000. o journal entry will b D) N e made until expenditures for the authorized purpose occur.

Explanation / Answer

The correct answer is B) A credit to Deferred Inflows of Resources - Grant Proceeds in the amount of $300,000

The amount of $300,000 notified as an approval of grant to City of Dustin will be recorded by them as a deferred income as the same hs not been realised yet due to the condition attached to it. The condition is that it is payable as a reimbursement basis as and when city expends resources for the intended purpose of the grant. Since As of May 1, city has not made any expenses for this purpose and hence nothing is paid to them as a grant. However grant will be realised as and when they make expenses. Considering this it should be recorded as a deferred revenue.

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