3. Patriotic Company purchased a machine for P6,000,000 on January 1, 2019 and received a
government grant ofP600,000 toward the asset cost.
The machine is to be depreciated on a straight line basis over 10 years with a residual value of
P500,000.
On January 1, 2021, the grant becomes fully repayable because of noncompliance with conditions.
Required: Prepare the journal entry for 2019 and 2020 and 2021 assuming (20 pts)
a) the grant is account for as a deferred income
b) The grant is accounted for as a deduction from asset