Goodhelp inc gi received a 300000 grant from the nova scotia...

Goodhelp Inc. (GI) received a $300,000 grant from the Nova Scotia government on December 30, to assist with rising employment costs. GI is entitled to this grant if it employs a specific number of local employees during the following year, and management is certain that GI can meet this criterion. The grant was paid up front on December 30, and GI uses the gross method for accounting for government grants. Which of the following accounts should GI credit when the grant is received, assuming that GI reports under IFRS? Question 1 options: a) Revenue b) Grant payable c) Deferred government grant d) Wages expense

Transcript

00:01 Hello students, here is a question.

00:02 The hantau company receives a government grant of 2 million related to a factory building purchase.

00:09 So, we have some transactions given in the question.

00:11 Let us prepare the journal entry for this.

00:17 So, the format of journal entry will be date, particulars, debit and credit.

00:39 So, the items will be the first is, let us record the purchase of a building on january 2021.

00:46 So, journal entry for january 2021 will be, so jan 21 will be building account debtor to cash account.

01:07 The building account is 12 millions to cash 10 millions to government grants 2 million.

01:25 So, our second journal entry is the depreciation expenses for the year 2021.

01:32 So, that is building cost minus residual value divided by useful life of depreciation which gives us 12 million minus 0 divided by 5.

01:43 So, therefore depreciation expenses will be 2 million 400.

01:47 So, our journal entry will be depreciation expenses account debtor to credit, sorry to accumulated depreciation is a credit.

02:02 So, that is 2 million 400 thousand and the third journal entry is record government grant as a deferred income.

02:17 So, the journal entry will be government grant debtor to deferred income.

02:25 The amount is 2 million.

02:42 So, the next transaction is amortization of a deferred income over the useful life of a building...

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