Government Grant

Question 1

Government grant in recognition of specific costs is recognized as income

a. Over the same period as the relevant expense.
b. Immediately.
C. Over a maximum of 5 years using straight line.
d. Over a maximum of 5 years using sum of digits.

Answer 1

a. Over the same period as the relevant expense.

Question 2

Government grant related to depreciable asset is usually recognized as income

a. Immediately.
b. Over the useful life of the asset using straight line.
c. Over the useful life of the asset using sum of digits.
d. Over the useful life of the asset and in proportion to the depreciation of the asset.

Answer 2

d. Over the useful life of the asset and in proportion to the depreciation of the asset.

Question 3

A government grant that becomes receivable as compensation for expenses or losses already incurred should be recognized as income

a. When received.
b. Of the period in which it becomes receivable.
c. Over a maximum of 5 years using straight line.
d. Over a maximum of 10 years using straight line.

Answer 3

b. Of the period in which it becomes receivable.

Question 4

In the case of grant related to an asset, which of following accounting treatment is prescribed?

a. Record the grant income in the first year.
b. Either set up the grant as deferred income or deduct it in arriving at the carrying amount of the asset.
c. Record the grant income in the next year.
d. Disclose only.

Answer 4

b. Either set up the grant as deferred income or deduct it in arriving at the carrying amount of the asset.

Question 5

In the case of grant related to income, which of the following accounting treatment. is prescribed?

a. Credit the grant to equity.
b. Present the grant as other income or as a separate line item, or deduct it from the related expense.
C. Credit the grant to retained earnings.
d. Credit the grant to sales.

Answer 5

b. Present the grant as other income or as a separate line item, or deduct it from the related expense.