Situation 1 On January 1, 2020, another entity purchased equipment costing P4,800,000 with a 6-year useful life, no residual value and used the cost model. On January 1, 2022, the entity elected to use the revaluation model. On such date, the replacement cost of the asset is P7,500,000. The entity restated its accumulated depreciation proportionately. The income tax rate is 30%. Situation 2 On January 1, 2020, an entity purchased equipment at a cost of P12,000,000 that has an 8-year useful life. The entity used the SYD method of depreciation. On the same date, the entity received a government grant of P3,600,000 towards the purchase of the equipment. The entity used the deferred income approach in accounting for the grant. On January 1, 2022, the entity violated some conditions attached to the grant and therefore returned the entire subsidy.

Situation 1 On January 1, 2020, another entity purchased equipment costing P4,800,000 with a 6-year useful life, no residual value and used the cost model. On January 1, 2022, the entity elected to use the revaluation model. On such date, the replacement cost of the asset is P7,500,000. The entity restated its accumulated depreciation proportionately. The income tax rate is 30%. Situation 2 On January 1, 2020, an entity purchased equipment at a cost of P12,000,000 that has an 8-year useful life. The entity used the SYD method of depreciation. On the same date, the entity received a government grant of P3,600,000 towards the purchase of the equipment. The entity used the deferred income approach in accounting for the grant. On January 1, 2022, the entity violated some conditions attached to the grant and therefore returned the entire subsidy.

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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