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Government Grant (Deduct from the Asset)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Government Grant (Deduct from the Asset)

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • August 22, 2021 at 4:33 am #632464
    7fsa
    Participant
    • Topics: 58
    • Replies: 41
    • ☆☆

    Dear Chris,

    I hope you are well and safe,
    thank you so much for your nice explanation and your humour I do enjoying watching your lectures and study ACCA.

    In respect of the government grant we have to method as per IAS 20 for capital Asset are as follow,
    1- Deduct the government grant of the assets acquired.
    2- treating the government grant as deferred income.
    in regarding to method number 2 I understand it very well, but regarding the first treatment it’s somehow confused for example it’s mentioned in Kaplan textbook the following

    Given information,
    government grant=$15000 and had been used to buy capital equipment as follow,
    Asset acquired =$100000
    Estimated useful life = 5 years.
    Required
    The presentation of (SFP) and (SPL) at the end of the year.

    **** The solution as per my understanding in details as follow,
    the recognition of the government grant is as follow
    Dr Bank $15000
    Cr Deferred income (SFP) $15000

    the entry of the asset recognition
    Dr PPE(SFP) $85000
    Dr Deferred income(SFP) $15000 as liability account
    Cr Bank $100000

    The annual depreciation of the year =85,000/5yrs = $17,000
    Dr Depreciation Expense $17,000
    Cr Accumulated Depreciation $17,000

    the presentation of the financial position
    Non-current assets.
    PPE (C.V) $68,000

    The presentation of the profit or loss and OCI
    Depreciation expense(SPL) $17,000

    Could you check out my workout, please? and tell me correction.
    Thank you in advance.

    August 29, 2021 at 11:02 am #633349
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6493
    • ☆☆☆☆☆

    Hi,

    I’d love to be able to go through each of your solutions to check if they are correct but I do not have the time to do so. Similar to my response to your previous post, do you not have a model answer to compare your answer to?

    Thanks

  • Author
    Posts
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