GIVU MANUFACTURERS (PTY) LTD operates a manufacturing plant in the Kwa-Zulu Natal province. During the unrest and riots, the company’s premises were breached resulting in damages to the buildings and machinery including the looting of inventory from the warehouse. Management estimated the damages to the property to be R 2.4 million, machinery to be R 860,000, and inventory lost of R 720,000. However, the company only received R 3 million (property of R 2 million, the machinery of R 400,000, and inventory of R 600,000) from the insurance company. Furthermore, the company received an amount of R 900,000 from the government unrest fund. The company incurred the following expenses to repair the damages to the assets:

(a) R 3 million to repair the damages to the property including an amount of R 500,000 to enhance the security features of the factory and warehouse buildings,

(b) Purchased a machine with a cost of R 1,2 million to replace a machine that was destroyed beyond repair (carrying amount of the machine was R 360,000) and R 300,000 to repair the other damaged machines. The machine that was destroyed beyond repair will be used as spare parts by the maintenance department; and

(c) R 540,000 to replace the inventory that was looted.

The community implemented a campaign with the police to track the goods looted and return goods with an estimated value of R 210,000 to the company. Management decided that the goods returned will be given to the employees, who sacrificed injury in protecting the company’s premises, for no consideration.

Required:

(a) Discuss how the amounts received from the insurance company and the government should be recognized in compliance with the accounting standards.

(b) Discuss how the machine that is damaged beyond repair should be recognized in compliance with the accounting records.

(c) Discuss how the goods returned by the community and the police should be recognized in compliance with the accounting records.