Reference no: EM132980928

Question - Entity Z receives the following grants in 20x1: (entries)

a. P 1,000,000 cash conditioned on the acquisition of Equipment.

b. Land with fair value of P800,000 conditioned construction of a building on the land.

c. P600,000 cash as aid on a planned environmental project - clean-up drive on coastal areas within the community.

d. P200,000 cash as aid on losses incurred from a recent typhoon

Requirements -

1: Provide the entries to record the receipts of the grants. Use gross presentation. The following transactions occurred in 20x1 after the receipt of the grants:

a. Equipment was acquired for P1,200,000 on March 1, 20x1. The equipment was assessed to have a 5-year useful life and a 10% residual value. Entity Z uses the SYD method of depreciation.

b. Construction of a building on the land was started. Total construction costs incurred during the period amounted to P2,000,000

c. The clean-up drive was finished for a total cost of P720,000

2: Provide the entries to record the subsequent transactions. Use gross presentation.

3: Prepare partial statement of financial position and statement of profit or loss for 20x1 under the gross presentation. Be sure to present the correct net effect of the transactions above in Entity Z's profit or loss for 20x1.