PLEASE EXPLAIN EACH QUESTONS

QUICKLY!!!

Use the following information for the next four questions.

Nadine Company received a P1,800,000 subsidy from the

government to purchase manufacturing equipment on

January 2, 2020. The equipment has a cost of P3,000,000,

a useful life a six years, and no salvage value. Nadine

depreciates the equipment on a straight-line basis.

10. If Nadine chooses to account for the grant as deferred

income, the grant income to be recognized in 2020 is

a. Nil c. P 500,000

b. P300,000 d. P1,800,000

11. In the case of grants related to an asset, which of

these accounting treatments (balance sheet

presentation) is prescribed by PAS 20?

a. Record the grant at a nominal value in the first

year and write it off in the subsequent year.

b. Either set up the grant as deferred income or

deduct in arriving at the carrying amount of the

asset.

c. Record the grant at fair value in the first year and

take it to income in the subsequent year.

d. Take it to the statement of comprehensive income

and disclose it as an extraordinary gain.

12. If Nadine chooses to account for the grant as an

adjustment to the asset, the carrying amount of the

asset on the December 31, 2020 statement of financial

position is

a. P1,200,000 c. P2,200,000

b. P1,000,000 d. P2,500,000

13. Which of the following is true regarding the alternative

ways to apply the income approach to accounting of

resources acquired through government grants?

a. Expenses will be higher and net income lower if the

grant is recorded as deferred income.

b. Expenses will be higher and net income lower if the

grant is accounted for as an adjustment to the

asset.

c. Depreciation expense will be higher if the grant is

recorded as an adjustment to the asset, but net

income will be the same under the two

alternatives.

d. Depreciation expense will be higher if the grant is

recorded as deferred income, but net income will

be the same under the two alternatives.

Use the following information for the next three questions.

On January 1, 2019, Citimart Inc. was granted land in a

village, located near the slums outside the city limits, by a

local government authority. The condition attached to this

grant was that the company should clean up this land and

lay roads by employing laborers from the village in which

the land is located. The government has fixed the

minimum wage payable to the workers. The entire

operation will take three years and is initially estimated to

cost P160 million. The fair value of this land on the date of

grant was P240 million and is expected to increase by at

least 20% annually because of the improvements to be

done by the company.

In relation to the attached condition, the company incurred

costs of P80 million in 2019 and P70 million in 2020. On

December 31, 2020, the company estimated that it will

incur additional cost of P30 million in 2021.

14. Non-monetary government grants are measured at

a. Fair value

b. Nominal amount

c. Either a or b

d. Neither a nor b

15. How much should be recognized as income from

government grant for the year ended December 31,

2019?

a. P160,000,000 c. P80,000,000

b. P120,000,000 d. P70,000,000

16. How much should be recognized as income from

government grant for the year ended December 31,

2020?

a. P120,000,000 c. P80,000,000

b. P150,000,000 d. P70,000,000

17. Lively Inc. received a consolidated grant of P120

million. Three-fourths of the grant is to be utilized to

purchase a college building for students from

underdeveloped or developing countries. The balance

of the grant is for subsidizing the tuition costs of those

students for four years from the date of grant.

The college building, which costs P100 million, will be

depreciated using the straight-line method over 10

years. Assuming that the tuition subsidy will be

offered evenly over the period of 4 years, the amount

that should be recognized as income at the end of year

1 is

a. P12.0 million c. P16.5 million

b. P10.0 million d. P17.5 million

18. Which statement is incorrect regarding a government

loan at a below-market rate of interest?

a. The benefit of a government loan at a belowmarket

rate of interest is treated as a government

grant.

b. The benefit of the below-market rate of interest

shall be measured as the difference between the

initial carrying value of the loan determined in

accordance with PFRS 9 and the proceeds

received.

c. The entity shall consider the conditions and

obligations that have been, or must be, met when

identifying the costs for which the benefit of the

loan is intended to compensate.

d. The benefit is accounted for in accordance with

PFRS 9.

19. Puff Company is engaged in the operation of public

highways and skyways in the Philippines. On

November 8, 2019, a catastrophe devastated some of

the company's operated highways and skyways. The

company suffered P5.6 billion loss due to catastrophe.

On January 1, 2020, the Philippine government

decided to compensate the company for the incurred

loss. The government loaned P5 billion at 5% per

annum with maturity period of 5 years. The present

value of cash flows at January 1, 2020 using the

current market rate for similar type of loan after

considering credit risks attached was P4.2 billion. The

conditions stipulated on the loan agreement provide

that the proceeds will be used for reconstruction of the

skyways and highways.

On January 1, 2020, how much should the company

recognize as government grant?

a. Nil c. P4 billion

b. P5 billion d. P0.8 billion