Question

A company purchased a fixed asset of worth 50 lakhs. Expected useful life is 10 years and expected residual value is ? 5 lakhs. The company charged depreciation using straightline method. Company received Govt. grants to the extent of 50% of the cost of fixed assets. If company follows the policy of transferring Govt. grants into reserve. Calculate the amount allocated to Profit & Loss Account. (a) If company charges depreciation on straightline basis. (b) If the company charges depreciation using WDV method @ 20%, calculate the amount allocated to profit & loss account. (c) If the company charged depreciation using WDV method @ 20% till 5th and thereafter switched to straightline method, calculate excess grant allocated. What will be the accounting treatment of excess grant allocation?​

Answer 1

Answer:

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