Grant 8

8. On 10 January 2016 Matlho Manufacturing Company received a P600 000 grant from government as an incentive to establish and operate a manufacturing plant in a particular location, in a SEZA zone. The grant is conditional on Matlho erecting a plant costing at least P2 000 000 in the development zone with production minimum set at a prescribed level and the plant commencing commercial production on or before 31 December 2017. If these conditions are not met, Matlho will be obliged to refund part of the grant to government. During 2016 Matlho constructed the plant at a cost of P2 200 000 with expected life of 10 years with residual value of P100 000. On 1 January 2017, the company started production. REQUIRED: Prepare journal entries to record the information set out above in the accounting records of Matlho for the years ended 31 December, 2016,2017, 2018, and 2019 on the assumption that Matlho failed to reach the prescribed production capacity and was required to repay P150 000 to government on 1 January 2019, and that Matlho recognized the grant as income