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A Company purchased a piece of equipment for USD 2,500,000 on 15th of July 2049....

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Accounting

A Company purchased a piece of equipment for USD 2,500,000 on 15th of July 2049. The equipment is expected to have an economic life of 10 years and will have no residual value. Depreciation is calculated on a straight-line basis over the life of the asset. The Company received a government grant of USD 500,000 towards the purchase of the equipment. The financial year end of the company is December 31st each year.

1. Please prepare the journal entries and calculate the account balances for the years ended 31 December 2049 by using two different methods used for accounting of government grants related to asset.

2. Please prepare the journal entries and calculate the account balances for the years ended 31 December 2050 by using two different methods used for accounting of government grants related to asset.

3. Please critically discuss the impact of 2 methods used for accounting of government grants related to an asset on profit and loss statements.

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