In December 20X0, the Consumer Association of America (CAA), a not-for-profit research organization, received a $6 million grant from the Sporting Goods Manufacturers Association (SGMA) to develop a football helmet that will provide better protection against head injuries. The grant was intended to cover $4 million of direct costs and $2 million of overhead costs. The grant contract stipulated that the SGMA would make its payment to the CAA upon receiving invoices from CAA for the actual direct costs incurred. It further required that the research results be reported only to the SGMA and not be made publicly available. Each reimbursement payment for direct costs incurred would also include an appropriate proportion of indirect costs (i.e., an additional $0.50 for each $1 of direct costs).
In 20Xl the CAA carried out and completed the research for which it contracted. Direct costs were, as estimated, $4 million. It submitted the necessary invoices and received payment in full.

1. Prepare required journal entries for 20X0 and 20Xl. Be sure to indicate whether each entry should be made to a restricted by donor fund or not restricted by donor fund. You need not, however, record the indirect costs themselves (inasmuch as, by their very nature, they are not tied directly to the grant).
2. Assume instead that in December 20X0 the CAA received from the National Sports Association (NSA) a pledge of $6 million. The donation is for research relating to football helmets. The NSA is a not-forprofit agency, and the results of any research will be in the public domain. In January 20Xl, the CAA received the contribution. Throughout the remainder of 20Xl it carried out its football-related research (incurring $4 million of direct costs). Prepare the required journal entries for 20X0 and 20Xl and indicate whether each entry should be made to a fund that is restricted by a donor or not.
3. Comment on any differences between the two awards that might justify differences in revenue recognition.
4. Suppose instead that the NSA promised to make its contribution only on receiving a report that the research had actually been completed. Would your approach have been different? Explain.