Reference no: EM132962969

Berkat Bhd acquired an agricultural machine to increase the production of the business. On 1 July 2019, Berkat Bhd received a grant of RM200,000 in order to purchase the agricultural machine, at a cost of RM600,000 for use in its business. It is the policy of Berkat Bhd to write off the grant received against asset acquired. The newly acquired asset will be depreciated over five years. However, on 1 July 2020 the company no longer complied to the condition attached to the grant. Government had required the Berkat Bhd to pay RM300,000. The financial year end is 30 June.

Problem 1. Calculate the depreciation of the agricultural machine for the year ended 30 June 2020 based on the policy adopted by Berkat Bhd.

a) RM40,000
b) RM80,000
c) RM120,000
d) RM60,000

Problem 2. Choose the correct statement in relation to MFRS 120 Government Grants and Disclosure of Government Assistance.

i. Amount of amortised grants related to income will be taken to profit or loss in the same period as the relevant costs or expenses are incurred.
ii. Grants in the form of rights to natural resources can be recognised either at fair value or nominal amount plus any expenditure that is directly attributable to preparing the assets for its intended use.
iii. Grants related to assets shall be presented in the Statement of Financial Position either by deducting the grant in arriving the carrying amount of the asset or by crediting directly to the shareholder interest.
iv. Company that has been awarded licence to operate from the government are given the choice to record the grant either at fair value or nominal amount.

a) i and ii
b) i, ii and iv
c) i, ii and iii
d) i, ii, iii and iv