Question

9.Sumas Township was approved for a grant from the federal government. The grant provides for reimbursement up to $200,000 for expenditures incurred to weatherize homes for low-income residents. Upon notification that the grant had been approved, but before weatherization activities have begun, Sumas Township should:

a)Debit due from the federal government for $200,000 and credit deferred inflow of resources for $200,000.

b)Credit deferred inflow of resources for $200,000.

c) Record no journal entry.

d) Debit due from the federal government for $200,000.

10.

The City of Birch Bay uses the purchases method for recording inventory of supplies in the general fund. Rather than using a perpetual inventory system, inventories are updated at year-end based on a physical inventory count. Physical inventories were $112,000 for the prior fiscal year and $128,000 for the current fiscal year. The adjusting journal entry at the end of the current fiscal year will include a:

a)Credit to expenditures for $16,000.

b)Credit to inventory of supplies for $16,000.

c)Debit to expenditures for $16,000.

d)Debit to inventory of supplies for $16,000.

Answer 1

9. a)Debit due from the federal government for $200,000 and credit deferred inflow of resources for $200,000.

As per IFRS grant receivable needs to be debited when there is certainty of recovery of grant and right to receive grant exist. And as per matching concept deferred inflow of resources need to be credited.

10. d)Debit to inventory of supplies for $16,000.

difference of $16000 i.e. $128,000 - $112,000 need to be transferred to inventory of supplies to bring inventory's value at its actual value.