50.1K

Verified Solution

Link Copied!

Tanjong Bhd. (Tanjong) acquired a machinery at the cost of RM700,000 on 1 November 2019. The machinery has an estimated life of 10 years with a residual value of 10% of its cost Tanjong uses a straight-line depreciation on a time-apportioned basis. For this acquisition, a government grant has been received. Tanjong received two grants during the year. Grant 1 This grant is equivalent to 30% of the machinery's cost price acquired on 1 November 2019. The terms of the grant are if the company retains the asset for four years or more, then no repayment liability will be incurred. If the machinery is sold within four years, Tanjong has to repay 90% of the grant received. Tanjong has no intention to sell the machinery within the first four years of purchase. 3 Tanjong's accounting policy is to apply the Deferred income method under IAS 20/MFRS 120 Accounting for government grant and disclosure of government assistance to account for this grant and to release them to the profit or loss over the life of the asset to which they relate. Grant 2 Tanjong participated in the Wage Subsidy Programme organized by the Social Security Organisation of Malaysia in order to encourage companies to maintain the employment of their low wage staff during the Covid 19 pandemic. On 28 May 2021, Tanjong received a letter from the government confiming a subsidy of RM32,000 which will be received in July 2021. This subsidy is for the wages paid from January 2021 to March 2021. The year end of Tanjong is 31 May. Required: In accordance with IAS 20/MFRS 120 Accounting for government grant and disclosure of government assistance (a) Prepare the extracts of Tanjong Bhd.'s financial statements for the year ended 31 May 2020 and 31 May 2021 for Grant 1. (8 marks) (b) List the journal entries on the repayment if Tanjong Bhd. sells the machinery on 1 June 2021. (3 marks) (c) Explain how the Grant 2 should be accounted for in the books of Tanjong Bhd. for the year ended 31 May 2021 [Total:16 marks) (5 marks) Tanjong Bhd. (Tanjong) acquired a machinery at the cost of RM700,000 on 1 November 2019. The machinery has an estimated life of 10 years with a residual value of 10% of its cost Tanjong uses a straight-line depreciation on a time-apportioned basis. For this acquisition, a government grant has been received. Tanjong received two grants during the year. Grant 1 This grant is equivalent to 30% of the machinery's cost price acquired on 1 November 2019. The terms of the grant are if the company retains the asset for four years or more, then no repayment liability will be incurred. If the machinery is sold within four years, Tanjong has to repay 90% of the grant received. Tanjong has no intention to sell the machinery within the first four years of purchase. 3 Tanjong's accounting policy is to apply the Deferred income method under IAS 20/MFRS 120 Accounting for government grant and disclosure of government assistance to account for this grant and to release them to the profit or loss over the life of the asset to which they relate. Grant 2 Tanjong participated in the Wage Subsidy Programme organized by the Social Security Organisation of Malaysia in order to encourage companies to maintain the employment of their low wage staff during the Covid 19 pandemic. On 28 May 2021, Tanjong received a letter from the government confiming a subsidy of RM32,000 which will be received in July 2021. This subsidy is for the wages paid from January 2021 to March 2021. The year end of Tanjong is 31 May. Required: In accordance with IAS 20/MFRS 120 Accounting for government grant and disclosure of government assistance (a) Prepare the extracts of Tanjong Bhd.'s financial statements for the year ended 31 May 2020 and 31 May 2021 for Grant 1. (8 marks) (b) List the journal entries on the repayment if Tanjong Bhd. sells the machinery on 1 June 2021. (3 marks) (c) Explain how the Grant 2 should be accounted for in the books of Tanjong Bhd. for the year ended 31 May 2021 [Total:16 marks)

Answer & Explanation Solved by verified expert

See Answer