Surgimed Ghana Ltd. received a government grant of GH¢300,000 for acquiring plant and machinery costing GH¢1,500,000 during 2017 financial year and having a useful life of 10 years. The grant received was credited to deferred income in the statement of financial position as a result of adopting the deferred income approach of accounting for government grant. During the 2020 financial year, the company had to refund the grant to the government due to non-compliance of the conditions laid down for the grant. Required Explain to directors of Surgimed Ghana Ltd. what should be the

FINANCIAL ACCOUNTING
10th Edition
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Chapter1: Financial Statements And Business Decisions
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Surgimed Ghana Ltd. received a government grant of GH¢300,000 for acquiring plant and machinery
costing GH¢1,500,000 during 2017 financial year and having a useful life of 10 years. The grant
received was credited to deferred income in the statement of financial position as a result of adopting
the deferred income approach of accounting for government grant. During the 2020 financial year,
the company had to refund the grant to the government due to non-compliance of the conditions laid
down for the grant.
Required
Explain to directors of Surgimed Ghana Ltd. what should be the appropriate treatment of the
refund of the grant.

Explain the effect on the cost of the plant and machinery, and the amount of depreciation that
should be charged during the 2020 financial year financial statements.

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