A government college received a $2 million federal grant restricted to research on developing a process for synthesizing a stable triple helix. $500,000 of qualifying research costs were incurred during the year. The college should report:

Question

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The grant is restricted to research on developing a process for synthesizing a stable triple helix, meaning that the college must incur qualifying research costs in order to recognize revenue. Only $500,000 of qualifying research costs were incurred during the year, so the college should recognize grant revenues of $500,000 and a liability for unearned grant revenues of $1.5 million. The liability will be recognized until qualifying research costs equal or exceed $2 million, at which point the grant will be fully earned and the remaining liability can be recognized as revenue.

A Government College Received a $2 Million Federal Grant Restricted