On August 1, 2012, it announced a $2 million grant to a local school district fo

Question

On August 1, 2012, it announced a $2 million grant to a local school district for the purchase of computers. The district can spend the funds upon receipt. On September 15, 2012, the state mailed a check for the full amount to the district. The district spent $1.5 million on computers during fiscal 2013 (i.e., the year ending August 31, 2013) and expects to spend the remaining $0.5 million in fiscal 2014.

a.Prepare the journal entries that the state would make in fiscal 2013 to record the awards in an appropriate governmental fund. Briefly justify the amount of expenditure that you recognized.

b.What, if any, adjustment to the amount of expenditure recognized would the state have to make in preparing its government-wide statements?

c.Describe briefly how the recipients would account, in both fund and government-wide statements for the awards.

Explanation / Answer

(a) Debit Credit

Grant Expenditure 2 million

Cash 2 million

To recognize grant to acquire computer, and the grant is restricted as to purpose and funds can not be spent before receipt,here that is why full amount have to be recognizeed.

Ans (b)The state should not have to make any changes oe adjustments to convert to full accrual government wide statement . The rule of revenue recognition apply to both the fund and the government wide states. With one exception revenues have to meet the available criteria to be recorded in the funds statements. Their 2 million grant was given by the state and was given by the states and received by the school in 2012, the fact is that schoold district is spending most of the money in 2013 and the balance in 2014 will not have any effect on the states budget.

Ans C) here the grant receiver that is school would actually accept the income in same duration in which the state would accept the excepnse in fund reports. But in government wide statements receiver (in this case school) utilizes the computer system and depreciate it on the useful life. they dont accept the income in the smae duration as state accepts the expenses.

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