Paul City Received Payment of Two Grants from the State

question 4

Short Answer

Paul City received payment of two grants from the state during its fiscal year ending September 30, 2016. Grant A can be used to cover any operating expenses incurred during fiscal 2017. Grant B can be used at any time to acquire equipment for the city's fire department. Should the city report these grants as grant revenues or deferred inflows in its governmental fund financial statements for fiscal 2016?

---

Definitions:

Accrued Interest

Interest that has been incurred but not yet paid, often related to bonds or loans.

Bond Issue Costs

The expenses associated with the issuance of bonds, including legal, accounting, underwriting fees, and other related costs.

Straight-Line Method

A method of calculating depreciation by evenly allocating the cost of an asset over its useful life.

Effective Interest Method

A technique used in accounting to allocate the interest expense or income of a financial instrument over its lifespan in a way that results in a constant rate on the carrying amount.