ACC460 problem 5-11

journal entries for ACC460 problem 5-11 in government and not-for-profit accounting.
P. 5-11
Nonexchange expenditures are the mirror image of nonexchange
revenues.
A state government provided several grants to school
districts and local governments during its fiscal year ending
August 31.
1. 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.
2. On the same date the state announced a $10 million
grant to another school district for the acquisition of
equipment. However, per the provisions of this grant the
state will make payments only upon receiving documentation
from the district that it has incurred allowable
costs. In fiscal 2013, the district incurred and documented
allowable costs of $8 million. Of this, the state
paid only $7 million, expecting to reimburse the district
for the balance early in fiscal 2014.
3. The state also announced a $5 million grant to a third
school district, again for the acquisition of computers.
The state will make annual five $1 million payments
to the district, starting on September 15, 2013. The
district is required to expend the funds in the fiscal year
in which they are received.
4. Toward the end of fiscal 2013, it awarded a $500,000
contract to the accounting department of a local
university to support a review of the state’s cost
accounting system. The department intends to carry
out the review during 2014 and issue its final report
to the state in early 2015. Upon announcing the
award, the state made an advance payment of $100,000
Solution to Exercise for Review and Self-Study 221
to the department. It intends to pay the balance when
the department completes the project to the satisfaction
of the state.
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.