How much should be recognized as income from government

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Government grant

On January 1, 2018, Citimart Inc. was granted 5,000 acres of land in a village, located near the slums outside the city limits, by a local government authority. The condition attached to this grant was that the company should clean up this land and lay roads by employing labourers from the village in which the land is located. The government has fixed the minimum wage payable to the workers. The entire operation will take three years and is initially estimated to cost P160 million. The fair value of this land on the date of grant was P240 million and is expected to increase by at least 20% annually because of the improvements to be done by the company. In relation to the attached condition, the company incurred costs of P80 million in 2018 and P70 million in 2019. On December 31, 2019, the company estimated that it will incur additional cost of P30 million in 2020.

Required:

Problem 1. How much should be recognized as income from government grant for the year ended December 31, 2019?

Problem 2. Prepare the journal entries in 2020 related to the government grant.

Reference no: EM132695395

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