ABC Co. received a $500,000 government grant for the purchase of new equipment that cost...
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ABC Co. received a $500,000 government grant for the purchase of new equipment that cost $2,500,000. ABC received the cash for the grant during 2020. The equipment was acquired on January 1, 2020, and is being depreciated on a straight-line basis over 10 years. The estimated residual value is $0. Under the terms of the grant, the company must keep the asset for at least five years. ABC expects that it will comply with the terms of the grant. The company has a December 31 year end and prepares its financial statements in accordance with ASPE. Required: Prepare all required journal entries pertaining to the equipment and related grant for ABC for its year ended December 31, 2020, assuming that:
a) ABC uses the net method to account for government grants
. b) ABC uses the gross method to account for government grants.
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