ACCA FR Syllabus B. Accounting For Transactions In Financial Statements - Government Grants Part 1 - Past Papers ^{1 / 2}

September 2016

2948 others answered this question

MC Question 3

On 1 January 20X6, Gardenbugs Co received a $30,000 government grant relating to equipment which cost $90,000 and had a useful life of six years.

The grant was netted off against the cost of the equipment. On 1 January 20X7, when the equipment had a carrying amount of $50,000, its use was changed so that it was no longer being used in accordance with the grant.

This meant that the grant needed to be repaid in full but by 31 December 20X7, this had not yet been done.

Which journal entry is required to reflect the correct accounting treatment of the government grant and the equipment in the financial statements of Gardenbugs Co for the year ended 31 December 20X7?

A	Dr Property, plant and equipment	$10,000
	Dr Depreciation expense	$20,000
	Cr Liability	$30,000

B	Dr Property, plant and equipment	$15,000
	Dr Depreciation expense	$15,000
	Cr Liability	$30,000

C	Dr Property, plant and equipment	$10,000
	Dr Depreciation expense	$15,000
	Dr Retained earnings	$5,000
	Cr Liability	$30,000

D	Dr Property, plant and equipment	$20,000
	Dr Depreciation expense	$10,000
	Cr Liability	$30,000

Reveal answer

June 2015

2052 others answered this question

MC Question 15

Which of the following statements about IAS 20 Accounting for Government Grants and Disclosure of Government
Assistance are true?

(i)	A government grant related to the purchase of an asset must be deducted from the carrying amount of the asset in the statement of financial position
(ii)	A government grant related to the purchase of an asset should be recognised in profit or loss over the life of the asset
(iii)	Free marketing advice provided by a government department is excluded from the definition of government grants
(iv)	Any required repayment of a government grant received in an earlier reporting period is treated as prior period adjustment

A (i) and (ii)
B (ii) and (iii)
C (ii) and (iv)
D (iii) and (iv)

Reveal answer