Reference no: EM132620819

Galendez Company received the following grants on January 1, 201Q:

1. A grant of 48,000,000 to compensate for costs to be incurred in planting trees over a period of 5 years whereby the entity will incur such costs at 1,600,000 for 2017;

3,200,000 for 2018; 4,800,000 for 2019; 6,400,000 for 2020 and 8,000,000 for 2021.

2. A tract of land in Mindanao with a fair value of 21,600,000 by the national government. The grant requires Galendez company to construct a refinery on the site estimated at a cost of 36,000,000, the useful life of which is 20 years.

3. Galendez Company purchased a machine for 6,750,000 on January 1, 20Q. The entity received a government grant of 1,125,000 in respect of this asset. The policy is to depreciate the asset over 5 years on a straight line basis and to treat the grant as deferred income. On Jan. 1, 20S, the grant became fully repayable because of non compliance with conditions.

Required:

Problem 1: Prepare the entries in connection with the grants received above for 2 years. Show the necessary solution. In case 3, present you answer for the two approaches