Reference no: EM132588097
Problem 1: Jojo Bhd. (Jojo) received two different government grants as listed below:
Date: I April2015
Details: Jojo acquired an item of plant costing RM330,000. The plant has an estimated life of 8 years with a residual value equals to 20% of its cost. Jojo uses straight- line depreciation on a time apportionment basis. The company received a government grant of 30% of its cost price at the time of its purchase.
Date: 1 March 2016
Details: Jojo received an official letter from the government pending RM15,800 grant to be received on 8 August 2016. The grant is to subsidise the staff training cost incurred by Jojo during the year which amounted to RM78,700.
The profits before depreciation for the years ended 31 July 2015 and 2016 were RM100,000 and RM1 3 0,000 respectively.
Required:
(a) Prepare the extracts of Jojo Bhd.'s financial statements for the years ended 31 July 2015 and 2016 in respect of the above government grant based on the two approaches acceptable under IAS 20.
(b) Explain with relevant figures the accounting treatments for the government grant receivable of RM15,800.
Problem 2: Amber Bhd (Amber) is a company engaged in the glove making industry. It has received the following two government grants during the financial year ended 31 December 2016:
- On 1 January 2016, Amber acquired a specialized plant costing RM500,000 with a residual value of nil. The plant is to be depreciated on a straight-line basis over five years on a time apportionment basis. Amber received a government grant for 40% of the original cost of the plant.
- On 31 December 2016, Amber received a government grant of RM100,000 to subsidise the staff training costs incurred by the company during the year. The staff training costs incurred by the company during the year were RM150,000.
Required:
Discuss how Amber Bhd should account for the above two government grants in its financial statement for the year ended 31 December 2016 in accordance with IAS 20 Accounting for Government Grant and Disclosure of Government Assistance.
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