On January 1, 2021, Raquel Company purchased a machine for 3,000,000. The entity received a government grant of 500,000 in respect of this asset. The policy is to depreciate the asset over 5 years on a straight line basis and to treat the grant as deferred income. On January 1, 2023, the grant became fully repayable because of non compliance with conditions. Required: Prepare journal entries for 2021, 2022 and 2023.

On January 1, 2021, Raquel Company purchased a machine for 3,000,000. The entity received a government grant of 500,000 in respect of this asset. The policy is to depreciate the asset over 5 years on a straight line basis and to treat the grant as deferred income. On January 1, 2023, the grant became fully repayable because of non compliance with conditions. Required: Prepare journal entries for 2021, 2022 and 2023.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 1, 2021, Raquel Company purchased a machine for 3,000,000. The entity received a government grant of 500,000 in respect of this asset.

The policy is to depreciate the asset over 5 years on a straight line basis and to treat the grant as deferred income.

On January 1, 2023, the grant became fully repayable because of non compliance with conditions.

Required:

Prepare journal entries for 2021, 2022 and 2023.

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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