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    Government Grants: Use The Following Information For The Next Three Questions

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    JEFFERSON CUTE
    The document discusses accounting for government grants according to PAS 20, including how to measure and present non-monetary grants and monetary grants in financial statements. It provides an example where an entity received land from the government worth ₱200,000 which it used to construct a building, and asks how to account for the government grant and depreciation of the building over multiple years under gross and net presentation methods. The solutions show that under the gross method the building amount does not change but depreciation is higher, while under the net method the building amount deducts the grant but depreciation is lower.

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    Government Grants: Use The Following Information For The Next Three Questions

    Uploaded by

    JEFFERSON CUTE
    708 views2 pages
    The document discusses accounting for government grants according to PAS 20, including how to measure and present non-monetary grants and monetary grants in financial statements. It provides an example where an entity received land from the government worth ₱200,000 which it used to construct a building, and asks how to account for the government grant and depreciation of the building over multiple years under gross and net presentation methods. The solutions show that under the gross method the building amount does not change but depreciation is higher, while under the net method the building amount deducts the grant but depreciation is lower.

    Original Title

    Chapter 18_govt Grants

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    The document discusses accounting for government grants according to PAS 20, including how to measure and present non-monetary grants and monetary grants in financial statements. It provides an example where an entity received land from the government worth ₱200,000 which it used to construct a building, and asks how to account for the government grant and depreciation of the building over multiple years under gross and net presentation methods. The solutions show that under the gross method the building amount does not change but depreciation is higher, while under the net method the building amount deducts the grant but depreciation is lower.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    708 views2 pages

    Government Grants: Use The Following Information For The Next Three Questions

    Uploaded by

    JEFFERSON CUTE
    The document discusses accounting for government grants according to PAS 20, including how to measure and present non-monetary grants and monetary grants in financial statements. It provides an example where an entity received land from the government worth ₱200,000 which it used to construct a building, and asks how to account for the government grant and depreciation of the building over multiple years under gross and net presentation methods. The solutions show that under the gross method the building amount does not change but depreciation is higher, while under the net method the building amount deducts the grant but depreciation is lower.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Page |1

    Chapter 18
    Government Grants
    1. According to PAS 20, non-monetary grants are measured at
    a. the fair value of the non-monetary asset.
    b. nominal amount.
    c. the amount of cash received or receivable.
    d. a or b

    2. According to PAS 20, government grants are presented in the financial statements using
    a. a gross presentation. c. a or b
    b. a net presentation. d. a functional presentation.

    Use the following information for the next three questions:


    On January 1, 20x1, Entity A received land with fair of ₱200,000 from the government conditioned
    on the construction of a building on the lot. Entity A started immediately the construction and it was
    completed on December 31, 20x1 for a total cost of ₱1,000,000. The building has an estimated useful
    life of 10 years and zero residual value.

    3. How much is the income from government grant in 20x1 and 20x2, respectively?
    20x1 20x2
    a. 0 200,000
    b. 200,000 0
    c. 0 20,000
    d. 20,000 20,000

    4. How much is the carrying amount of the building on December 31, 20x2 under the following
    presentations?
    Gross presentation Net presentation
    a. 1,000,000 800,000
    b. 900,000 720,000
    c. 800,000 640,000
    d. 800,000 533,333

    5. How much is the depreciation expense recognized in 20x3 under the following presentations?
    Gross presentation Net presentation
    a. 100,000 80,000
    b. 100,000 100,000
    c. 80,000 100,000
    d. 80,000 80,000

    “A fool shows his annoyance at once, but a prudent man overlooks an insult.”
    (Proverbs 12:16)
    - END -
    SOLUTIONS:

    1. D
    2. C
    Page |2

    3. C 20x1 = 0, no depreciation yet is recognized from the building; therefore, no income yet is
    recognized from the government grant (i.e., ‘matching’). The building starts to be depreciated in
    20x2.
    20x2 = 20,000 (200,000 ÷ 10 years)

    4. B Gross presentation: (1M x 9/10) = 900,000;


    Net presentation: (1M – 200K) x 9/10 = 720,000

    5. B Gross presentation: (1M ÷ 10) = 100,000;


    Net presentation: (1M – 200K) ÷ 10 = 80,000

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