PSD Bhd. (PSD) is a public listed company on Bursa Malaysia. On 1 July 2019, PSD Bhd. purchased a new machine for cash of RM2,000,000. The machine has an expected life of 10 years and a nil residual value. Depreciation is to be provided based on time apportioned basis. PSD received a 50% grant towards the cost of machine on the same date. PSD's accounting policy for capital-based grants is to treat them as deferred income and release them to income over the life of the asset to which they relate. On 31 December 2020, it is found that PSD can no longer fulfil the requirements of the government and hence PSD had to repay 50% of the grant on 31 December 2020. The accounting year end for PSD is 31 December each year. Required: Prepare the joumal entries to record the grant, depreciation and the repayment of the grant from 1 July 2019 until 31 December 2020.

PSD Bhd. (PSD) is a public listed company on Bursa Malaysia. On 1 July 2019, PSD Bhd. purchased a new machine for cash of RM2,000,000. The machine has an expected life of 10 years and a nil residual value. Depreciation is to be provided based on time apportioned basis. PSD received a 50% grant towards the cost of machine on the same date. PSD's accounting policy for capital-based grants is to treat them as deferred income and release them to income over the life of the asset to which they relate. On 31 December 2020, it is found that PSD can no longer fulfil the requirements of the government and hence PSD had to repay 50% of the grant on 31 December 2020. The accounting year end for PSD is 31 December each year. Required: Prepare the joumal entries to record the grant, depreciation and the repayment of the grant from 1 July 2019 until 31 December 2020.

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

PSD Bhd. (PSD) is a public listed company on Bursa Malaysia. On 1 July 2019, PSD Bhd.
purchased a new machine for cash of RM2,000,000. The machine has an expected life of
10 years and a nil residual value. Depreciation is to be provided based on time apportioned
basis.
PSD received a 50% grant towards the cost of machine on the same date. PSD's accounting
policy for capital-based grants is to treat them as deferred income and release them to
income over the life of the asset to which they relate.
On 31 December 2020, it is found that PSD can no longer fulfil the requirements of the
government and hence PSD had to repay 50% of the grant on 31 December 2020.
The accounting year end for PSD is 31 December each year.
Required:
Prepare the joumal entries to record the grant, depreciation and the repayment of the grant
from 1 July 2019 until 31 December 2020.

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