Reference no: EM132861072

Questions -

Question 1 - Raquel Company purchased a machine for P3,000,000 on January 1, 2020. The entity received a government grant of P500,000 in respect of this asset. The policy is to depreciate the asset over 5 years on a straight-line basis and to treat the grant as deferred income. On January 1, 2022, the grant became fully repayable because of noncompliance with conditions. Required: Prepare journal entries for 2020, 2021 and 2022.

Question 2 - i) The Scandium Company is commencing a new construction project, which is to be financed by borrowing. The key dates are as follows: 15 May 20X8 Loan interest relating to the project starts to be incurred 3 June 20X8 Technical site planning commences 12 June 20X8 Expenditures on the project start to be incurred 18 July 20X8 Construction work commences According to IAS23 Borrowing costs, from what date can Scandium commence the capitalization of borrowing costs?

a. 15 May 20X8

b. 3 June 20X8

c. 12 June 20X8

d. 18 July 20X8

ii) The Palila Company purchased a varnishing machine for PHP150,000 on 1 January 20X7. The company received a government grant of PHP13,500 in respect of this asset. Company policy was to depreciate the asset over 4 years on a straight-line basis and to treat the grant as deferred income. Under IAS20 Government grants and government assistance, what should be the carrying amounts of the machine and the deferred income ("DI") balance at 31 December 20X8?

a. PHP75,000 PHP6,750

b. PHP112,500 PHP10,125

c. PHP112,500 PHP10,125

d. PHP75,000 PHP13,500

iii) The December 31, 2019 and 2018 comparative financial statements of World Gallery Company showed equipment with an original cost P379,000 and P344,000 with accumulated depreciation of P153,000 and P128,000, respectively. During 2019, the company purchased equipment costing P50,000, and sold equipment with a carrying value of P9,000. What amount should the company report as depreciation expense for 2019?

a. 19,000

b. 25,000

c. 31,000

d. 34,000