A company received a government grant of 25% towards the purchase of the cost of a machine costing £120,000 during the year ended 31 March 2014. The plant’s residual value was £20,000 and has an estimated useful life of four years.

Required:

Explain and show how the government grant will be treated in the financial statements if the grant is treated as deferred income

Answer rating: 100% (QA)

If the government grant is treated as deferred income it means that the grant will not be recognized ... View the full answer