Grant 7

7. In an effort to revive the economic activities in Silibe Pikwe township and its surrounding villages, government decided to give P500 000 grant to Ms Molomo, the bakery specialist in town, on 1 July 2015. Out of P500 000 grant P300 000 was to assist the acquisition of bakery machinery and the balance was to assist Ms Molomo on employing three (3) employees from the surrounding villages to work for the bakery for at least four (4) years. On 1 July, 2015 Ms Molomo bought the bakery machinery at P700 000. Transportation and installation costs for the machinery were P20 000 and P15 000 respectively. The machine which had economic life of 10 years and residual value of P50 000 was put in operation on 5 July 2015. 3 On 1 July 2015 Ms Molomo employed 10 people including three (3) from surrounding villages. The total monthly salary was P25 000 including P7 500 for 3 employees from the surrounding villages. The salaries are expected to remain constant for some years. Ms Molomo's business has a 31st December year end and provides depreciation based on the period the asset has been in use during the year. REQUIRED: Prepare Journal entries necessary to record the above transactions for the years 2015 and 2016 on the assumption that Ms Molomo's business recognises grant as income