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Chapter 24 Answer Key

This document contains two problems related to accounting for grants and long-term debt. Problem 24-8 discusses the deferred income and deduction from asset approaches to accounting for a government grant related to a building. It provides journal entries for 2020 and 2021 under each approach. Problem 24-11 contains multiple choice questions regarding accounting for the discount on a note payable and deferred grant income.

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Shane Tabunggao
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2K views3 pages

Chapter 24 Answer Key

This document contains two problems related to accounting for grants and long-term debt. Problem 24-8 discusses the deferred income and deduction from asset approaches to accounting for a government grant related to a building. It provides journal entries for 2020 and 2021 under each approach. Problem 24-11 contains multiple choice questions regarding accounting for the discount on a note payable and deferred grant income.

Uploaded by

Shane Tabunggao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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PROBLEM 24 - 8

DEFERRED INCOME APPROACH


2020
Jan. 1 Building 12,000,000
Cash 12,000,000
1 Cash 2,000,000
Deferred grant income 2,000,000
Dec. 31 Depreciation - Building (12,000,000/5yrs) 2,400,000
Accumulated Depreciation - Building 2,400,000
31 Deferred grant income (2,000,000/5yrs) 400,000
Grant income 400,000
2021
Dec. 31 Depreciation - Building 2,400,000
Accumulated Depreciation - Building 2,400,000
31 Deferred grant income 1,600,000
Loss on repayment of grant 400,000
Cash 2,000,000

# Building 12,000,000
Accumulated Depreciation (2,400,000 x 2) (4,800,000)
Carryng Amount 12/31/21 7,200,000

DEDUCTION FROM ASSET APPROACH


2020
Jan. 1 Building 12,000,000
Cash 12,000,000
1 Cash 2,000,000
Building 2,000,000
Dec. 31 Depreciation - Building 2,000,000
Accumulated Depreciation - Building 2,000,000
2021
Jan. 1 Building 2,000,000
Cash 2,000,000
Dec. 31 Depreciation - Building 2,800,000
Accumulated Depreciation - Building 2,800,000

#Depreciation on original carrying amount 2,000,000


Depreciation on increased carrying amount (2,000,000/5 x 2) 800,000
Total depreciation for 2021 2,800,000
PROBLEM 24 - 11
1. A. All of these are included in the journal entry JOURNAL ENTRY
#Note payable 5,000,000 Cash
Present value (5,000,000 x .75) 3,750,000 Discount on note payable
Discount on note payable 1,250,000
2. B. 375,000
# Present Value 3,750,000
Interest rate 0.10
Interest expense 375,000
3. B. 875,000
# Deferred grant income 1/1/20 1,250,000
Grant income 375,000
Deferred grant income 12/31/20 875,000
4. D. 4, 537,500
# Present Value 1/1/20 3,750,000
Interest for 2020 375,000
Present value 12/31/20 4,125,000
Interest for 2021 (4,125,000x10%) 412,500
Carrying amount - 12/31/21 4,537,500

PROBLEM 24 - 12
1. A. Government grant
3. C. The entity will comply with the conditions of the grant and the grant will be received.
5. A. Over the same period as the relevant expense
7. D. Should be recognized as income over the periods which bear the cost of meeting the conditions.
9. B. Either set up the grant as deferred income or deduct it in arriving at the carrying amount of the asset
JOURNAL ENTRY
5,000,000
Discount on note payable 1,250,000
Note Payable 5,000,000
Deferred Grant Income 1,250,000

nt will be received.

ost of meeting the conditions.


t the carrying amount of the asset.

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