. During 2020, Peach Company purchased machine for P7,0000,000 and received a government grant of P1,000,000 toward capital cost. The machine is to be depreciated on a straight-line method basis over 5 years and estimated to have residual value of P500,000 at the end of the period.

. During 2020, Peach Company purchased machine for P7,0000,000 and received a government grant of P1,000,000 toward capital cost. The machine is to be depreciated on a straight-line method basis over 5 years and estimated to have residual value of P500,000 at the end of the period.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

A. During 2020, Peach Company purchased
machine for P7,0000,000 and received a
government grant of P1,000,000 toward
capital cost.
The machine is to be depreciated on a
straight-line method basis over 5 years
and estimated to have residual value of
P500,000 at the end of the period.
Required:
Prepare journal entries using Deferred
Approach and Deduction from Asset
Approach.

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