B. Perkasa Jaya Bhd is a company operated in pharmaceutical industry. The company produces generic products of prescription medicine, over the counter non-prescription medicine and health and food supplements. Following the increase in the demand of the products in the market, Perkasa Jaya Bhd commences operation of a new plant to enhance the production capacity of the company. The company receives a grant from the government amounted to RM 350,000 for the automated packaging machine that costs RM 1,750,000. According to the policy of the company, the machine will be depreciated by using straight line basis over eight years of useful life with residual value of RM 23,000.

Required:

i. Determine the classification of grant received by Perkasa Jaya Bhd and state reason for your answer.

(3 marks)

ii. Assuming that Perkasa Jaya treated the grant as deferred income, prepare the relevant journal entries to record the grant upon receiving the grant and upon subsequent measurement.

(8 marks)

iii. Assuming that Perkasa Jaya netted off the grant against the machine account, prepare the relevant journal entries to record the grant upon receiving the grant and upon subsequent measurement.

(5 marks)

C. In addition to the above grant, Perkasa Jaya Bhd also received a government grant of RM 100,000 for marketing and technical consultation