Cranston LTD. prepares its financial statements according to International Financial Reporting Standards. InOctober 2018, the company received a $2 million government grant. The grant represents 20% of the total cost ofequipment that will be used to improve the roads in the local area. Cranston recorded the grant and the purchaseof the equipment as follows:Cash ................................. 2,000,000Revenue....................... 2,000,000Equipment....................... 10,000,000Cash ............................. 10,000,000Required:1. Explain the alternative accounting treatments available to Cranston for accounting for this government grant.2. Prepare any necessary correcting entries under each of the alternatives described in requirement 1.
Cranston LTD. prepares its financial statements according to International Financial Reporting Standards. In
October 2018, the company received a $2 million government grant. The grant represents 20% of the total cost of
equipment that will be used to improve the roads in the local area. Cranston recorded the grant and the purchase
of the equipment as follows:
Cash ................................. 2,000,000
Revenue....................... 2,000,000
Equipment....................... 10,000,000
Cash ............................. 10,000,000
Required:
1. Explain the alternative accounting treatments available to Cranston for accounting for this government grant.
2. Prepare any necessary correcting entries under each of the alternatives described in requirement 1.
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