A city receives notice of a $150,000 grant from the state to purchase vans to transport physically challenged individuals. Although the city did not receive any of the grant funds during the current year, the city purchased a bus for $65,000 and issued a purchase order for a van for $60,000. The grant revenue that the city should recognize in the government-wide financial statements in the current year is

Question

Quizplus · Accepted Answer

Under accrual accounting, as used in government-wide financial statements, revenues are recognized when they are earned, regardless of when the cash is received. Since the city has been notified of the grant and has incurred eligible expenses by purchasing a bus and issuing a purchase order for a van, it should recognize the full grant revenue of $150,000 in the current year.

A City Receives Notice of a $150,000 Grant from the State