The city of Milan was notified that it had been approved for a state government grant in the amount of $1,000,000 to help finance its new city jail.The money from the grant will be received later in the current fiscal year.The journal entry to record this transaction will include

Question

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The journal entry to record the approval of the state government grant should include a credit to Revenues when all eligibility requirements have been met. At the point of notification, the city has not yet met all eligibility requirements for the grant, so it would not be appropriate to credit Other Financing Sources. Likewise, the grant has not yet been received, so it would not be appropriate to credit Revenues upon receipt of the money from the state or Other Financing Sources upon receipt of the money from the state. Instead, the city should credit Revenues when all eligibility requirements are met, which typically occurs after the city has completed any necessary paperwork and demonstrated its compliance with the terms of the grant.

The City of Milan Was Notified That It Had Been