Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

Exercise 67

On December 1, 2010, a state government awards a city government a grant of $1 million to be used specifically to provide hot lunches for all schoolchildren.No money is received until June 1, 2011.For each of the following, indicate whether the statement is true or false and, if false, explain why.
a.Because the government received no money until June 1, 2011, no amount of revenue can be recognized in 2010 on the government-wide financial statements.
b.If this grant has no eligibility requirements and the money is properly spent in September 2011 for the hot lunches, the revenue should be recognized during that September.
c.Because the money came from the state government and because the government specified the use, this is a government-mandated nonexchange transaction.
d.If the government had received the money on December 1, 2010, but eligibility requirements had not been met yet, a deferred revenue of $1 million would have been recognized on the governmentwide financial statements.
e.The rules for recognition of this revenue were created by GASB Statement 34.