A capital projects fund for a new city courthouse recorded a receivable of $300,000 for a state grant and a $450,000 transfer from the general fund. WHat amount should be reported as revenue by the capital proejects fund?

A.$0

B.$300,000

C. $450,000

D. $750,000

I chose A..but the answer is B. I know $450,000 is other financing sourse. But how about state grant of $300,000...i thought we don't consider revenue till we actually spent it....? Am i wrong here? THanks! ( governmental accouinting is driving my nuts )

The answer is B.

Capital project funds is a type of govermental funds. You recognize revenue when it is measurable and available (collectable in 60 days). So the $300,000 state grant should be recorded as revenue. Don't know how you got the idea that you don't record revenue till you actually spent it. you are right about the $450,000 as other financing source.

In a way I agree with you. This type of revenue falls under the class of Govt-mandated non-exchange transactions and voluntary non-exchange transactions. For these, the Govt. recognizes the revenue when all eligibilty requirments have been met. In the problem there were no eligibility rules specified for the grant.

nkocpa, I looked it up on the becker Explanation. It says "The state grant would be reported as revenue in the capital projects fund, and the transfer from the general fund would not. (should be "other financing source" not revenue). The receivable associated with this capital project assumes revenues have been earned by either incurring eligible capital outlay expenditures or by satisfaction of other pertinent grant requirements prior to accuring the receivable. "

So I think the question is not asking you to determine the eligibilty requirements for the grant, instead, it assumes it has already met. It is testing which amount should be recorded as revenue, which one is for "other financing source".

Yes that is what I meant. There were no eligibility rules mentioned hence the revenue should be recognized immediately and answer = B.

I was just commenting on the fact that if eligibility rules had been mentioned, then the timing of the revenue would have ben different.

I was agreeing to Venchui's explanation but not his answer. Thanks.