Government Grant

GOVERNMENT GRANT
Assignment
GENERAL INSTRUCTIONS:
In your worksheet as a group, all answers shall be listed on the left side, with computations properly referenced
and presented in the rest of the paper. Every mistake shall be slapped a 10-point deduction. Answers with no
proper solutions will not be considered. This may be another major quiz.
1. On January 1, 20x1, Roger received land from the government with the condition that a building
should be constructed on it. The fair value of the land was Php 500,000. The construction of the
building was completed on January 1, 20x3 for a total cost of Php 1,000,000. The building has a useful
life of 10 years and a zero residual value. Roger uses the straight-line method. What are the amounts
for depreciation and income from grant recognized in the following dates if Roger uses the gross
method?
Depreciation expense Income from government grant

1/1/20x1 ??? ???
1/1/20x2 ??? ???
12/31/20x2 ??? ???
12/31/20x3 ??? ???
2. A recent typhoon caused Php 40 million in damages to Roger’s properties in 20x1. Accordingly, the
government gave Roger a financial aid of Php 10 million. How much is recognized immediately in
profit or loss for the year?
3. The Roger company purchased a major new piece of machinery for Php 10 million on January 1, 20x8.
It will depreciate this machinery on a straight line basis over its useful life of 10 years, assuming a
zero residual value. Also on January 1 20x8 the company received a government grant of Php 1 million
to help finance this machinery.
If the net method is used, on December 31, 20x8, how much of the following are presented?
a. Cost
b. Carrying amount
c. Depreciation
d. Deferred income
If the gross method is used, on December 31, 20x8, how much of the following are presented?
e. Cost
f. Depreciation
g. Carrying amount
h. Deferred income
4. Roger purchased a jewel polishing machine for Php 360,000 on 1 January 20x7 and received a
government grant of Php 50,000 towards the capital cost. Company policy is to treat the grant as a
reduction in the cost of the asset. The machine was to be depreciated on a straight-line basis over 8
years and was estimated to have a residual value of Php 5,000 at the end of this period. Under PAS
20, what should be the depreciation expense in respect of the machine for the year ended December
31, 20x7?
5. Roger purchased a varnishing machine for Php 150,000 on January 1, 20x7. The company received a
government grant of Php 13,500 in respect of this asset.
Roger was to depreciate the asset over four years on a straight-line basis and to treat the grant as
deferred income.
Under PAS 20, what should be the carrying amounts of the following at December 31, 20x8?
a. Machine
b. Deferred income
6. On August 1, 20x1, Roger received Php 1,800,000 grant from the government to aid in Roger Co.
clean-up drive in the nearby creek. The cleanup took Roger 6 months to complete – from September
1, 20x1 to March 1, 20x1. The clean-up costs totaled Php 2,700,000 and were incurred evenly.
a. If Roger Co. uses the gross presentation, how much is the income from the government grant in
20x1?
b. How much is the balance of the deferred income from government grant on December 31, 20x1?
c. If Roger Co. uses the net presentation, how much is the cost of the cleanup recognized as expense
in 20x1?
7. On January 1, 2012, an entity received Php 6,000,000 as government grant to compensate for costs
to be incurred in planting 100 trees every year in a reforestation area over a period of 3 years.
On January 1, 2013, the entire amount of the government grant became repayable because the entity
has never planted trees in 2012. How much loss is recognized with the repayment?
8. On January 1, 20x2, an entity purchased equipment for Php 5,000,000 and received a government
grant of Php 500,000 with respect to this asset. The equipment is to be depreciated on a straight-line
basis over 5 years. The estimated residual value of the equipment is Php 200,000.
On January 1, 20x3, the whole grant became repayable because the equipment purchased did not
meet specified requirements.
a. Under the gross method, how much loss is reflected?

b. Under the net method, provide the complete entry to effect the repayment.
MIAW

Government Grant - Assignment - For Posting

Uploaded by

Copyright:

Available Formats

Government Grant - Assignment - For Posting

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Government Grant - Assignment - For Posting

Uploaded by

Copyright:

Available Formats

Depreciation expense Income from government grant

a. Under the gross method, how much loss is reflected?

You might also like