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- Cranston LTD. prepares its financial statements according to International Financial Reporting Standards. InOctober 2018, the company received a $2 million government grant. The grant represents 20% of the total cost ofequipment that will be used to improve the roads in the local area. Cranston recorded the grant and the purchaseof the equipment as follows:Cash ................................. 2,000,000Revenue....................... 2,000,000Equipment....................... 10,000,000Cash ............................. 10,000,000Required:1. Explain the alternative accounting treatments available to Cranston for accounting for this government grant.2. Prepare any necessary correcting entries under each of the alternatives described in requirement 1.On January 1, 2011, Sagada Company received a grant of P25,000,000 from the American government in order to defray safety and environmental costs within the area where the entity is located. The safety and environmental costs are expected to be incurred over four years, respectively, P4,000,000, P3,000,000, P5,000,000 and P8,000,000. How much income from the government grant should be recognized in 2011? A. 20,000,000 B. 4,000,000 C. 30,000,000 D. 6,000,000On January 1, 2015, MERKS Company received a grant of P25,000,000 form the American government in order to defray safety and environmental costs within the area where the entity is located. The safety and environmental costs are expected to be incurred over four year, respectively, P4,000,000, P2,000,000, P8,000,000 and P6,000,000. What amount should be recognized in 2015? * a. 25,000,000 b. 2,500,000 c. 5,000,000 d.7,500,000
- On January 1, 2014, Valiant Company received a Government grant of P60,000,000 to compensate for the cost to be incurred in planting trees over a period of 5 years. Valiant Company will incur such cost at P2,000,000 for 2014, P4,000,000 for 2015, P6,000,000 for 2016, P8,000,000 for 2017, and P10,000,000 for 2018. What amount of income from the government grant is recognized for 2015?Surgimed Ghana Ltd. received a government grant of GH¢300,000 for acquiring plant and machinery costing GH¢1,500,000 during 2017 financial year and having a useful life of 10 years. The grant received was credited to deferred income in the statement of financial position as a result of adopting the deferred income approach of accounting for government grant. During the 2020 financial year, the company had to refund the grant to the government due to non-compliance of the conditions laid down for the grant. Required: (i) Explain to directors of Surgimed Ghana Ltd. what should be the appropriate treatment of the refund of the grant. (ii) Explain the effect on the cost of the plant and machinery, and the amount of depreciation that should be charged during the 2020 financial year financial statements.Surgimed Ghana Ltd. received a government grant of GH¢300,000 for acquiring plant and machinery costing GH¢1,500,000 during 2017 financial year and having a useful life of 10 years. The grant received was credited to deferred income in the statement of financial position as a result of adopting the deferred income approach of accounting for government grant. During the 2020 financial year, the company had to refund the grant to the government due to non-compliance of the conditions laid down for the grant. Required Explain to directors of Surgimed Ghana Ltd. what should be the appropriate treatment of the refund of the grant. Explain the effect on the cost of the plant and machinery, and the amount of depreciation that should be charged during the 2020 financial year financial statements.
- Transaction ESurgimed Ghana Ltd. received a government grant of GH¢300,000 for acquiring plant and machinery costing GH¢1,500,000 during 2017 financial year and having a useful life of 10 years. The grant received was credited to deferred income in the statement of financial position as a result of adopting the deferred income approach of accounting for government grant. During the 2020 financial year, the company had to refund the grant to the government due to non-compliance of the conditions laid down for the grant. RequiredExplain to directors of Surgimed Ghana Ltd. what should be the appropriate treatment of the refund of the grant. Explain the effect on the cost of the plant and machinery, and the amount of depreciation thatshould be charged during the 2020 financial year financial statements.At the beginning of current year, Exuberant Company received a consolidated grant of P12,000,000. Three-fourths of the grant will be utilized to purchase a college building for students from underdeveloped or developing countries. The balance of the grant is for subsidizing the tuition costs of those students for four years from the date of grant. The building was purchased in early part of January and is to de depreciated using straight line over 10 years. The tuition costs paid in the current year amounted to 600,000. Required: Prepare journal entries for the current year.In 2016, the city of Abu Dhabi collected $24 million in fines from motorists because of traffic violations caught by red-light cameras. The cost of operating the system was $14.5 million. The net profit, that is, profit after operating costs, is split equally (that is, 50% each) between the city and the operator of the camera system. What will be the rate of return over a 3-year period to the contractor that paid for, installed, and operates the system, if its initial cost was $10 million and the profit for each of the 3 years is the same as it was in 2016? Should the company invest in this project at MARR of 15% per year?
- I Company received a government grant of P15,000,000 to install and run a windmill in an economically backward area. The entity has estimated that such a windmill would cost P25,000,000 to construct. The secondary condition attached to the grant is that the entity shall hire labor in the local market from the economically backward area where the windmill is located, instead of employing workers from other parts of the country. The entity shall maintain a ratio of 1:1 local worker to workers from outside in its labor force for the next 5 years. The construction was completed at the beginning of current year. The windmill is to be depreciated using the straight line method over a period of 10 years. What amount of income from the government grant is recognized for the current year?On January 1, 2021 the national government provided a grant to Brgy ACYFA2 amounting to 24,000,000 intended to contrustruct a new barangay hall provided that the said construction was finished August 15, 2021 for an amount of P32,000,000 with best estimate of the useful life at 40 years Based on the problem, what is the net effect on the profit or loss for the year 2023? Ans: -200,000 *need solution*On Jan. 1, 2021, Microsoft Company received a consolidated grant of P12,000,000. Three-fourths of the grant will be utilized to purchase a college building for students from underdeveloped or undeveloped countries. The balance of the grant is for subsidizing the tuition costs of those students for five years from the date of grant. The building was purchased in Jan. 1, 2021 and is to be depreciated using straight-line method over 10 years. The tuition costs paid in 2021 amounted to P600,000. How much income from government grant should be recognized for 2021? a. P 1,500,000b. P 3,000,000c. P 1,900,000d. P 1,650,000