Vacation City was awarded a $500,000 federal operating grant for use in Year 2. On December 1 of year 1,half of the grant money was received by the City.The journal entry to record receipt of the grant funds will include:

Question

Quizplus · Accepted Answer

When a grant is received but the related allowable costs have not yet been incurred, it is recorded as Deferred Inflow of Resources- Grant Proceeds until the costs are incurred. Therefore, the correct journal entry to record the receipt of the grant funds on December 1 of year 1 is a credit to Deferred Inflow of Resources- Grant Proceeds in the amount of $250,000. No entry is made to revenues or expenditures until the grant is spent in Year 2.

Vacation City Was Awarded a $500,000 Federal Operating Grant for Use