b) ABC Company obtained a grant of GHe 10 million from a government agency for an investment project to construct a manufacturing plant of at least GHe88 million. The principal term is that the grant payments relate to the level of capital expenditure. The secondary intention is to safeguard 300 jobs. The grant will have to be repaid pro-rata if there is underspending on capital. Twenty percent of the grant will have to be repaid if the jobs are not safeguarded within 18 months after the date of the last asset purchase. The plant was completed on 1 January 2008 at a total cost of GH490 million. The plant had an expected useful life of 20 years and is depreciated on a straight-line basis with nil residual value. ABC Company adopts the policy of setting government grants up as deferred income. Required: Show the relevant Statement of Profit or Loss and Statement of financial position extracts as well as the relevant disclosures in the 2008 final accounts.

b) ABC Company obtained a grant of GHe 10 million from a government agency for an investment project to construct a manufacturing plant of at least GHe88 million. The principal term is that the grant payments relate to the level of capital expenditure. The secondary intention is to safeguard 300 jobs. The grant will have to be repaid pro-rata if there is underspending on capital. Twenty percent of the grant will have to be repaid if the jobs are not safeguarded within 18 months after the date of the last asset purchase. The plant was completed on 1 January 2008 at a total cost of GH490 million. The plant had an expected useful life of 20 years and is depreciated on a straight-line basis with nil residual value. ABC Company adopts the policy of setting government grants up as deferred income. Required: Show the relevant Statement of Profit or Loss and Statement of financial position extracts as well as the relevant disclosures in the 2008 final accounts.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 17E: Postman Company is considering two independent projects. One project involves a new product line,...

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