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.

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.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 88P

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