1. Government grant in recognition of specific costs is recognized as income 8.
The deferred grant income is classified as
a. over a maximum of 5 years using straight line. a. partly current and partly noncurrent liability
b. over the same period as the relevant expense. b. other income
c. immediately. c. noncurrent liability
d. over a maximum of 5 years using sum of digits.
9. At the beginning of current year, Bantayan Company received a grant of P5,000,000 from the
2. Government grant related to depreciable asset is usually recognized as income British government to compensate for massive losses incurred because of a recent tsunami. The
a. over the useful life of the asset using sum of years digits. grant was made for the purpose of giving immediate financial support to the entity. It will take the
b. over the useful life of the asset using straight line. entity two years to reconstruct the assets destroyed by the tsunami. What amount of grant
c. immediately. income should be recognized in the current year?
d. over the useful life of the asset and in proportion to the depreciation of the asset.
Answer: 5,000,000
3. Government grant related to non depreciable asset that requires fulfillment of certain conditions.
a. Should be recognizes as income over 40 years. 10. At the beginning of current year, Same company received a grant of P30million from American
b. should not be recognized as income. government in order to defray safety and environmental costs within the area where the entity is
c. Should be recognized as income over the periods which bear the cost of meeting the located. The safety and environmental costs are expected to be incurred over four years
conditions. respectively, P2million, P4 million, P6 million and P8 million. What amount should be recognized
d. should be recognized as income immediately. as grant income for the current year?
4. Government grant shall be recognized when there is reasonable assurance that. Answer: 3,000,000
a. the entity will comply with the conditions of the grant and the grant will be received.
b. the grant will be received. 11. On January 1, 2019, Superclose company received a grant of P3,000,000 from the government
c. the grant must have been received. to subsidize tuition fees for a period of 5 years. On January 1, 2021, the entity violated certain
d. the entity will comply with the conditions of the grant condigions attached to the grant and therefore had to repay fully such grant to the government.
What is the grant income for 2019?
5. In the case of grant related to an asset, which of the following accounting treatment is
prescribed? Answer: 600,000
a. record the grant at fair value in the first year and take it to income in the subsequent year.
b. either set up the grant as deferred income or deduct it in arriving at the carrying amount o the 12. On January 1, 2019, Superclose company received a grant of P3,000,000 from the government
asset. to subsidize tuition fees for a period of 5 years. On January 1, 2021, the entity violated certain
c. take it to the income statement and disclose it as an extraordinary gain. condigions attached to the grant and therefore had to repay fully such grant to the government.
d. record the grant at a nominal value in the first year and write it off in the subsequent year. What amount be recognized as loss resulting from the repayment of the grant in 2021?
6. It is a government grant whose primary condition is that an eity qualifying for it should purchase, Answer: 1,800,000
construct or otherwise acquire long term asset.
a. grant related to asset
b. government gift
c. government appropriation
d. grant related to income
7. It is an action by a government designed to provide an economic benefit specific to an entity and
for which the government cannot reasonably place a value.
a. government assistance
b. government takeover
c. government grant
d. subvention
