PROBLEM 24-2
On January 1, 2021, Citimart Company was granted by a local government authority 5,000
hectares of land located near the slums outside the city limits.
The condition attached to this grant was that the entity shall clean up this land and lay roads by
employing laborers from the village where the land is located.
The government has fixed the minimum wage payable to the workers.
The entire operation will take 3 years and is estimated to cost P10,000,000.
This amount will be spent P2,000,000 for 2021, P2,000,000 for 2022 and P6,000,000 for 2023.
The fair value of this land is P12,000,000.
Required:
Prepare journal entries for the current year in connection with the grant
Solution:
2022
LAND 12,000,000
DEFERRED GRANT INCOME 12,000,000
LAND IMPROVEMENT 2,000,000
CASH 2,000,000
DEFERRED GRANT INCOME 2,400,000
GRANT INCOME 2,400,000
2023
DEFERRED GRANT INCOME 2,400,000
GRANT INCOME 2,400,000
2024
DEFERRED GRANT INCOME 7,200,000
GRANT INCOME 7,200,000
On January 1, 2021, Citimart Company was granted by a local government authority 5,000
hectares of land located near the slums outside the city limits.
The condition attached to this grant was that the entity shall clean up this land and lay roads by
employing laborers from the village where the land is located.
The government has fixed the minimum wage payable to the workers.
The entire operation will take 3 years and is estimated to cost P10,000,000.
This amount will be spent P2,000,000 for 2021, P2,000,000 for 2022 and P6,000,000 for 2023.
The fair value of this land is P12,000,000.
Required:
Prepare journal entries for the current year in connection with the grant
Solution:
2022
LAND 12,000,000
DEFERRED GRANT INCOME 12,000,000
LAND IMPROVEMENT 2,000,000
CASH 2,000,000
DEFERRED GRANT INCOME 2,400,000
GRANT INCOME 2,400,000
2023
DEFERRED GRANT INCOME 2,400,000
GRANT INCOME 2,400,000
2024
DEFERRED GRANT INCOME 7,200,000
GRANT INCOME 7,200,000
