ABC Company received an $1,800,000 subsidy from the government to purchase manufacturing equipment on January, 2, 2018. The equipment has a cost of $3,000,000, a useful life a six years, and no salvage value. ABC depreciates the equipment on a straight-line basis.

Instruction: a) If ABC chooses to account for the grant as deferred revenue, calculate and show what would be the grant revenue recognized in 2018, depreciation expense in 2018, deferred grant revenue at the end of 2018 and the equipment's book value at the end of 2018.

b) If ABC chooses to account for the grant as an adjustment to the asset, calculate and show what would be the grant revenue recognized in 2018, depreciation expense in 2018 and the equipment's book value at the end of 2018.