[MissGWonder]

Could someone explain me when to recognize deferred inflow of resources and Uneared Revenue for Governmental Accounting? Looking at the MCQ below and with the correct answer I am a little confused:

Progressive Township Community College received $900,000 multi year research grant available for use on a pro-rata basis over the next three years subject to other enrollment based eligibility requirements. At the end of year 1 of the grant, the college had achieved enrollment levels that satisfied grant eligibility requirements below equal to $500,000. As a result of this transaction, the community college would recognize:

The correct ansder is

a. Revenue $300,000 Deferred Inflows of resources $200,000 Unearned Revenue $400,000j

My confusion stems from the recognition of deferred inflow of $200,000. What is the reason we are not recognizing theole $600,000 as an unearned revenue? Thanks a lot for the explanation.

[LKD CPA]

MissG it says it's available for use on a pro-rata basis over the next three years. So, you can only receive revenue of $300k per year (900,000 / 3 = 300,000). However, because the college had $500,000 worth of grant eligible levels they know for sure they will be getting another 200k in the next year. This is the eligible 500,000 – the 300,000 already received. Which defers the $200,000 to next year.

FAR: 74, 83
REG: 76
BEC: 77
AUD: 89

[jstay]

idk if this helps but:

Deferred inflows:

Grants received in advanced of time requirements

proceeds from sale of future revenue–allocated equally

deferred gains on sale leasebacks

deferred outflows:

Deferred losses on sale leasebacks

Cost to acquire future revenues

grants expenditures in advance of time requirements

[MissGWonder]

Thank you all. It makes a lot more sense now.

[Author]

Replies