PROBLEM 24-3
At the beginning of the current year, Exodus Company purchased a machine for P8,000,000 and received
a government grant of P2,000,000 toward the capital cost.
The machine is to be depreciated on a straight-line basis over 10 years and estimated to have a residual
value of P500,000 at the end of this period.
Required:
Prepare journal entries for the current year assuming the grant is accounted for as deferred income and
deduction from asset.
Solution:
DEFERRED INCOME APPROACH:
MACHINERY 8,000,000
CASH 8,000,000
CASH 2,000,000
DEFERRED GRANT INCOME 2,000,000
DEPRECIATION EXPENSE 750,000
ACCUMULATED DEPRECIATION 750,000
DEFERRED GRANT INCOME 200,000
GRANT INCOME 200,000
DEDUCTION FROM ASSET APPROACH:
MACHINERY 8,000,000
CASH 8,000,000
CASH 2,000,000
MACHINERY 2,000,000
DEPRECIATION EXPENSE 550,000
ACCUMULATED DEPRECIATION 550,000
At the beginning of the current year, Exodus Company purchased a machine for P8,000,000 and received
a government grant of P2,000,000 toward the capital cost.
The machine is to be depreciated on a straight-line basis over 10 years and estimated to have a residual
value of P500,000 at the end of this period.
Required:
Prepare journal entries for the current year assuming the grant is accounted for as deferred income and
deduction from asset.
Solution:
DEFERRED INCOME APPROACH:
MACHINERY 8,000,000
CASH 8,000,000
CASH 2,000,000
DEFERRED GRANT INCOME 2,000,000
DEPRECIATION EXPENSE 750,000
ACCUMULATED DEPRECIATION 750,000
DEFERRED GRANT INCOME 200,000
GRANT INCOME 200,000
DEDUCTION FROM ASSET APPROACH:
MACHINERY 8,000,000
CASH 8,000,000
CASH 2,000,000
MACHINERY 2,000,000
DEPRECIATION EXPENSE 550,000
ACCUMULATED DEPRECIATION 550,000
