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    Chapter 24 Answer Key

    Uploaded by

    Shane Tabunggao
    This document contains two problems related to accounting for grants and long-term debt. Problem 24-8 discusses the deferred income and deduction from asset approaches to accounting for a government grant related to a building. It provides journal entries for 2020 and 2021 under each approach. Problem 24-11 contains multiple choice questions regarding accounting for the discount on a note payable and deferred grant income.

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    Chapter 24 Answer Key

    Uploaded by

    Shane Tabunggao
    1K views3 pages
    This document contains two problems related to accounting for grants and long-term debt. Problem 24-8 discusses the deferred income and deduction from asset approaches to accounting for a government grant related to a building. It provides journal entries for 2020 and 2021 under each approach. Problem 24-11 contains multiple choice questions regarding accounting for the discount on a note payable and deferred grant income.

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    Chapter 24 answer key

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    This document contains two problems related to accounting for grants and long-term debt. Problem 24-8 discusses the deferred income and deduction from asset approaches to accounting for a government grant related to a building. It provides journal entries for 2020 and 2021 under each approach. Problem 24-11 contains multiple choice questions regarding accounting for the discount on a note payable and deferred grant income.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    1K views3 pages

    Chapter 24 Answer Key

    Uploaded by

    Shane Tabunggao
    This document contains two problems related to accounting for grants and long-term debt. Problem 24-8 discusses the deferred income and deduction from asset approaches to accounting for a government grant related to a building. It provides journal entries for 2020 and 2021 under each approach. Problem 24-11 contains multiple choice questions regarding accounting for the discount on a note payable and deferred grant income.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
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    The key takeaways are how to account for deferred income, government grants, and the two approaches to accounting for grants related to assets - the deferred income approach and the deduction from asset approach.

    Deferred income is recognized as revenue over the periods to which it relates. The portion relating to future periods is recorded as a liability called 'deferred income'.

    If there are conditions attached to a government grant, the grant is initially recorded as deferred income and recognized as income when the conditions are met. The grant is recorded as income in the same period as the related expenses.

    PROBLEM 24 - 8

    DEFERRED INCOME APPROACH


    2020
    Jan. 1 Building 12,000,000
    Cash 12,000,000
    1 Cash 2,000,000
    Deferred grant income 2,000,000
    Dec. 31 Depreciation - Building (12,000,000/5yrs) 2,400,000
    Accumulated Depreciation - Building 2,400,000
    31 Deferred grant income (2,000,000/5yrs) 400,000
    Grant income 400,000
    2021
    Dec. 31 Depreciation - Building 2,400,000
    Accumulated Depreciation - Building 2,400,000
    31 Deferred grant income 1,600,000
    Loss on repayment of grant 400,000
    Cash 2,000,000

    # Building 12,000,000
    Accumulated Depreciation (2,400,000 x 2) (4,800,000)
    Carryng Amount 12/31/21 7,200,000

    DEDUCTION FROM ASSET APPROACH


    2020
    Jan. 1 Building 12,000,000
    Cash 12,000,000
    1 Cash 2,000,000
    Building 2,000,000
    Dec. 31 Depreciation - Building 2,000,000
    Accumulated Depreciation - Building 2,000,000
    2021
    Jan. 1 Building 2,000,000
    Cash 2,000,000
    Dec. 31 Depreciation - Building 2,800,000
    Accumulated Depreciation - Building 2,800,000

    #Depreciation on original carrying amount 2,000,000


    Depreciation on increased carrying amount (2,000,000/5 x 2) 800,000
    Total depreciation for 2021 2,800,000
    PROBLEM 24 - 11
    1. A. All of these are included in the journal entry JOURNAL ENTRY
    #Note payable 5,000,000 Cash
    Present value (5,000,000 x .75) 3,750,000 Discount on note payable
    Discount on note payable 1,250,000
    2. B. 375,000
    # Present Value 3,750,000
    Interest rate 0.10
    Interest expense 375,000
    3. B. 875,000
    # Deferred grant income 1/1/20 1,250,000
    Grant income 375,000
    Deferred grant income 12/31/20 875,000
    4. D. 4, 537,500
    # Present Value 1/1/20 3,750,000
    Interest for 2020 375,000
    Present value 12/31/20 4,125,000
    Interest for 2021 (4,125,000x10%) 412,500
    Carrying amount - 12/31/21 4,537,500

    PROBLEM 24 - 12
    1. A. Government grant
    3. C. The entity will comply with the conditions of the grant and the grant will be received.
    5. A. Over the same period as the relevant expense
    7. D. Should be recognized as income over the periods which bear the cost of meeting the conditions.
    9. B. Either set up the grant as deferred income or deduct it in arriving at the carrying amount of the asset
    JOURNAL ENTRY
    5,000,000
    Discount on note payable 1,250,000
    Note Payable 5,000,000
    Deferred Grant Income 1,250,000

    nt will be received.

    ost of meeting the conditions.


    t the carrying amount of the asset.

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