IA1 - Gov't Grant (CHAP 24)

Question 1

It is an assistance by government in the form of transfer of resources to an entity in return for past or future compliance with certain conditions.

a. Goverment grant
b. Government assistance
c. Government donation
d. Government aid

Answer 1

a. Goverment grant

Question 2

It is an action by a government designed to provide an economic benefit specific to an entity and for which the government cannot reasonably place a value.

a. Government grant
b. Government assistance
c. Government takeover
d. Subvention

Answer 2

b. Government assistance

Question 3

Government grant shall be recognized when there is reasonable assurance that

a. The entity will comply with the conditions of the grant.

b. The grant will be received.

c. The entity will comply with the conditions of the grant and the grant will be received.

d. The grant must have been received.

Answer 3

c. The entity will comply with the conditions of the grant and the grant will be received.

Question 4

It is a government grant whose primary condition is that an entity qualifying for it should purchase, construct or otherwise acquire long-term asset.

a. Grant related to asset
b. Grant related to income
c. Government gift
d. Government appropriation

Answer 4

a. Grant related to asset

Question 5

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 maximnum of 5 years using straight line.

d. Over a maximum of 5 years using sum of digits.

Answer 5

a. Over the same period as the relevant expense.

Question 6

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 usful life of the asset and in proportion to the depreciation of the asset.

Answer 6

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

Question 7

Government grant related to nondepreciable asset that requires fulfillment of certain conditions

a. Should not be recognized as income.

b. Should be recognized as income immediately.

c. Should be recognized as income over 40 years.

d. Should be recognized as income over the periods which bear the cost of meeting the conditions.

Answer 7

d. Should be recognized as income over the periods which bear the cost of meeting the conditions.

Question 8

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 8

a. When received.

Question 9

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 9

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

Question 10

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 10

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