NOTE: This solution assumes that the collection fee is recognized when cash is collected.
Deferred operating grant revenue
To record receipt of grant.
Deferred grant revenue is reported as a liability in the balance sheet. Operating grant revenues are
reported as nonoperating revenues in the period qualifying costs are incurred.
Expenses — Program A
Vouchers payable (or Cash)
To record expenses incurred for the program financed by the grant.
Deferred operating grant revenues
Revenues — operating grant
To record revenues earned on the grant.
Nonoperating revenues of $1,200,000 should be reported in the enterprise fund’s statement of
revenues, expenses, and changes in retained earnings (fund equity).
Deferred capital grant
To record receipt of capital grant.
Deferred capital grants are reported as a liability in the balance sheet. When qualifying costs are
incurred, the deferred capital grant liability is reduced and contributed capital from
intergovernmental grants, not revenues, is recognized.