Question 4 [20] We Light You Limited, a manufacturer of light bulbs was awarded a government...

Transcribed Image Text:

Question 4 [20] We Light You Limited, a manufacturer of light bulbs was awarded a government grant of R300 000 to purchase a specialised machine costing R500 000. This machine would enable the company to manufacture globes which will automatically come on when load shedding kicks in. The machine was purchased on the 1 March 2018 and had a useful life of 5 years with a residual value of R50 000. The company uses the straight-line method for depreciation. The grant was received because of compliance with certain conditions in the prior year. All conditions attached to the grant, except for the acquisition of the plant, had all been met on date of receipt. REQUIRED: 1.1 What two criteria must be met before a government grant can be recognised? (2) 1.2 Provide the general journal entries for the years ended 31 December 2018 and 2019. The company has the policy of recognising government grants as grant income. (18) All dates and narrations are required. Please show workings where applicable. Question 4 [20] We Light You Limited, a manufacturer of light bulbs was awarded a government grant of R300 000 to purchase a specialised machine costing R500 000. This machine would enable the company to manufacture globes which will automatically come on when load shedding kicks in. The machine was purchased on the 1 March 2018 and had a useful life of 5 years with a residual value of R50 000. The company uses the straight-line method for depreciation. The grant was received because of compliance with certain conditions in the prior year. All conditions attached to the grant, except for the acquisition of the plant, had all been met on date of receipt. REQUIRED: 1.1 What two criteria must be met before a government grant can be recognised? (2) 1.2 Provide the general journal entries for the years ended 31 December 2018 and 2019. The company has the policy of recognising government grants as grant income. (18) All dates and narrations are required. Please show workings where applicable.

Answer rating: 100% (QA)

11 What two criteria must be met before a government grant can be recognized There are two main crit... View the full answer