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Example #3 - Grant recognition for depreciable asset - both approaches A company receives a 20% grant towards the cost of a new item of
Example #3 - Grant recognition for depreciable asset - both approaches A company receives a 20% grant towards the cost of a new item of machinery, which cost $100,000. The machinery has an expected life of four years and a nil residual value. The expected profits of the company, before accounting for depreciation on the new machine or the grant, amount to $50,000 per annum in each year of the machinery's life. Solve using deferred income approach (gross method) Solve using reduced cost approach (net method) Show calculation, all relevant journal entries and extracts of p&l and SOFP as well
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