Scribd Logo
Upload

Welcome to Scribd!

  • Cfas Chapter 16 4

    Uploaded by

    Iana Jane Buron
    209 views3 pages
    This document presents two approaches to accounting for a government grant received for the purchase of machinery: 1) the deferred income approach, where the grant is initially recorded as deferred income and recognized as revenue over the asset's life, and 2) the deduction from asset approach, where the grant amount reduces the asset value recorded. It provides journal entries to illustrate each approach, including entries for the initial acquisition, recording the grant, annual depreciation calculation and recognition of grant income over the asset life.

    Original Description:

    Original Title

    Cfas-Chapter-16-4.docx

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    This document presents two approaches to accounting for a government grant received for the purchase of machinery: 1) the deferred income approach, where the grant is initially recorded as deferred income and recognized as revenue over the asset's life, and 2) the deduction from asset approach, where the grant amount reduces the asset value recorded. It provides journal entries to illustrate each approach, including entries for the initial acquisition, recording the grant, annual depreciation calculation and recognition of grant income over the asset life.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    209 views3 pages

    Cfas Chapter 16 4

    Uploaded by

    Iana Jane Buron
    This document presents two approaches to accounting for a government grant received for the purchase of machinery: 1) the deferred income approach, where the grant is initially recorded as deferred income and recognized as revenue over the asset's life, and 2) the deduction from asset approach, where the grant amount reduces the asset value recorded. It provides journal entries to illustrate each approach, including entries for the initial acquisition, recording the grant, annual depreciation calculation and recognition of grant income over the asset life.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 3

    Atienza, Ron Carlos Miguel E.

    BSA 1-3

    PROBLEM 16-4

    a. Deferred income approach

    1. To record the acquisition of the equipment

    Machinery 7,000,000
    Cash 7,000,000

    2. To record the government grant as deferred income:

    Cash 1,000,000
    Deferred grant income 1,000,000

    3. To record annual depreciation

    Depreciation 1,300,000
    Accumulated depreciation 1,300,000

    Cost of machinery 7,000,000


    Residual value (500,000)
    Depreciable amount 6,500,000

    Annual Depreciation (6,500,000 / 5) 1,300,000


    4. To recognize the income from government grant for the current year:

    Deferred grant income 200,000


    Grant income 200,000
    (1,000,000 / 5)

    b. Deduction from asset approach

    1. To record the acquisition of the machinery:

    Machinery 7,000,000
    Cash 7,000,000

    2. To record the government grant as a deduction from the cost of the asset:

    Cash 1,000,000
    Machinery 1,000,000

    3. To record the annual depreciation

    Depreciation 1,100,000
    Accumulated depreciation 1,100,000

    Acquisition cost 7,000,000


    Government grant (1,000,000)
    Net Cost 6,000,000
    Residual value (500,000)
    Depreciable amount 5,500,000

    Annual depreciation (5,500,000 / 5) 1,100,000

    You might also like