PROBLEM 3: EXERCISE
Solutions:
Requirement (a):
Gross presentation
Jan. 1, Cash 8,000,000
20x1 Deferred income –
government grant 8,000,000
Dec. 31, Building 20,000,000
20x1 Cash 20,000,000
Dec. 31, Depreciation expense 1,000,000
20x2 (20M ÷ 20 years)
Accumulated depreciation 1,000,000
Deferred income 400,000
(8M ÷ 20 years)
Income from government
Grant 400,000
Dec. 31, Depreciation expense 1,000,000
20x3 (20M ÷ 20 years)
Accumulated depreciation 1,000,000
Deferred income 400,000
(8M ÷ 20 years)
Income from government
Grant 400,000
Net presentation
Jan. 1, Cash 8,000,000
20x1 Deferred income – government
grant 8,000,000
Dec. 31, Building 20,000,000
20x1 Cash 20,000,000
Deferred income – government grant
Building 8,000,000
8,000,000
Dec. 31, Depreciation expense 600,000
20x2 (12M ÷ 20 years)
Accumulated depreciation 600,000
Dec. 31, Depreciation expense 600,000
20x2 (12M ÷ 20 years)
Accumulated depreciation 600,000
Requirement (b):
GROSS PRESENTATION
20x3 20x2 20x1
Statement of financial position
ASSETS
Building 20,000,000 20,000,000 20,000,000
Accumulated depreciation (2,000,000) (1,000,000) -
Total 18,000,000 19,000,000 20,000,000
LIABILITIES
Deferred income from government grant 7,200,000 7,600,000 8,000,000
20x3 20x2 20x1
Statement of profit or loss
Income from government grant 400,000 400,000 -
Depreciation expense (1,000,000) (1,000,000) -
Profit (Loss) (600,000) (600,000) -
NET PRESENTATION
20x3 20x2 20x1
Statement of financial position
ASSETS
Building 12,000,000 12,000,000 12,000,000
Accumulated depreciation (1,200,000) (600,000) -
Total 10,800,000 11,400,000 12,000,000
20x3 20x2 20x1
Statement of profit or loss
Depreciation expense (600,000) (600,000) -
Profit (Loss) (600,000) (600,000) -