Cullumber Ltd. received a $275000 grant from the federal government to help buy equipment as an incentive for them to establish manufacturing operations in Ottawa. The company assumes the equipment has a 10-year useful life and uses straight-line depreciation. If Cullumber uses the cost reduction method for such transactions, it should record this transaction as a O credit to Equipment for $275000. O credit to Contribution Revenue for $275000. O credit to Deferred Revenue for $275000. O memo entry only.

Cullumber Ltd. received a $275000 grant from the federal government to help buy equipment as an incentive for them to establish manufacturing operations in Ottawa. The company assumes the equipment has a 10-year useful life and uses straight-line depreciation. If Cullumber uses the cost reduction method for such transactions, it should record this transaction as a O credit to Equipment for $275000. O credit to Contribution Revenue for $275000. O credit to Deferred Revenue for $275000. O memo entry only.

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

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Cullumber Ltd. received a $275000 grant from the federal government to help buy equipment as an incentive for them to establish
manufacturing operations in Ottawa. The company assumes the equipment has a 10-year useful life and uses straight-line
depreciation. If Cullumber uses the cost reduction method for such transactions, it should record this transaction as a
O credit to Equipment for $275000.
O credit to Contribution Revenue for $275000.
O credit to Deferred Revenue for $275000.
O memo entry only.

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