Question

Excel City was awarded a $900,000 federal operating grant for use in Year 20X2. On December 1 of year 20X1, half of the grant money was received by the city. The journal entry to record receipt of the grant funds will include:______.

A) A credit to Grant Revenues of $450,000.
B) A credit to Deferred Inflow of Resources—Grant Award in the amount of $900,000.
C) A credit to Deferred Inflow of Resources—Grant Proceeds in the amount of $450,000.
D) No entry until the grant resources are expended.

Answer 1

The correct choice is C)

The journal entry to record receipt of the grants funds will include: A credit to Deferred Inflow of Resources—Grant Proceeds in the amount of $450,000.

Step-by-step explanation:

If a business receives a grant for acquisition of some assets, there are a couple of options to present such grant in the financial statements:

1. To present it as deferred income; or
2. To deduct the grant from the carrying amount of an asset acquired

Cheers!