This topic is about government grants. Choose the letter of correct answer. On January 1, 2020, Pharoah Company purchased a varnishingmachine for P6,000,000. The entity received a government grantof P540,000 in respect of this asset.The accounting policy is to depreciate the asset over 4 years ona straight line basis and to treat the grant as deferred income.What amount should be reported as deferred income onDecember 31, 2021?a. 270,000b. 405,000c. 135,000d. 540,000

Grants means the amount received without any sale of product or providing any services. Government…

Answered: Ôn January 1, 2020, Pharoah Company…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 6RE

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Petes Petroleum, Inc., an SEC registrant with a calendar year-end, is in the business of constructing and operating offs] lore oil platforms. Petes Petroleum is required legally to dismantle and remove the platforms at the end of their useful lives, which is estimated to be 10 years. On January 1, 2019, Pete constructed and began operating an offshore oil platform off the coast of Brazil. The total capitalized cost to construct the platform was 3,700,000. In addition, while the future cost of dismantling the oil platform is difficult to estimate, Pete believes there is a 40% chance that the future cost will be 1,425,000, a 40% chance it will be 1,650,000, and a 20% chance that it will cost 2,125,000. The appropriate discount rate is 12%, and Pete uses the straight-line method of depreciation. Required: 1. Prepare the journal entries that Pete should record in 2019 related to the oil platform. 2. Prepare an amortization schedule for the asset retirement obligation. 3. Next Level Prepare a table showing the effect of accounting for the asset retirement obligation on assets, liabilities, shareholders equity, and net income relative to accounting for the associated costs at the end of the assets service life when the expenditure is made.
Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2019. Gross receipts were 300,000. The following expenses were incurred and paid as indicated: Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 810, 2020. a. Calculate Ducks net income from the concert for tax purposes for 2019. b. Using the present value tables in Appendix H, what is the true cost to Duck if it had to defer the 100,000 deduction for the performers until 2020? Assume a 5% discount rate and a 21% marginal tax rate in 2019 and 2020.
In March 2019, Helen Carlon acquired used equipment for her business at a cost of 300,000. The equipment is five-year property for regular tax depreciation purposes. a. If Helen depreciates the equipment using the method that will produce the greatest deduction for 2019 for regular income tax purposes, what is the amount of the AMT adjustment? b. Draft a letter to Helen regarding the choice of depreciation methods. Helens address is 500 Monticello Avenue, Glendale, AZ 85306.

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