Y is provided a grant by the local government to purchase land for a building site. The grant is a zero-interest-bearing note for 5 years. The note is issued on January 2, 2019, for P5 million payable on January 2, 2024. Y's incremental borrowing rate is 6%. The land is not purchased until July 15, 2019.

Instructions

a. Prepare the journal entry(ies) to record the grant and note payable on January 2, 2019.

b. Determine the amount of interest expense and grant revenue to be reported on December 31, 2019.