A firm purchased a Machine on 1 January 2010. The Machine has a 5 year life and a residual value of $0. The Cost of the Machine was $200,000. The firm uses straight line depreciation and charges depreciation on a monthly basis.

The Government gave a Grant for the Machine on 1 January 2010 of $50,000

The firm is planning to use the Deferred Grant Method of accounting for the grant. However, one director has suggested using the Reduction of Asset Approach.

The Net Income under the Reduction of Asset Approach will differ from that of the Deferred Grant Method in which of the following ways:

Select one:

a. Net Income will be $10,000 lower with Reduction of Asset Approach

b. Net Income will be the same under both approaches

c. None of the these answers

d. Net Income will be $10,000 higher with Reduction of Asset Approach

e. Net Income will be $15,000 higher with Reduction of Asset Approach