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Tai Fat Ltd applied for a government grant of $2,000,000 on 5 January 2020 to...

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Accounting

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Tai Fat Ltd applied for a government grant of $2,000,000 on 5 January 2020 to cover part of the cost of a new machine. The grant was approved on 1 March 2020 and the government released the fund on 1 April 2020. Tai Fat Ltd purchased the machine for $10,000,000 with cash on 1 August 2020 and the machine was used for production immediately. The machine was depreciated over its estimated useful life of 10 years on straight line method and depreciation was calculated monthly. Tai Fat Ltd prepared its financial statements at 31 December each year. (a) On which date should Tai Fat Ltd recognize the government grant? Explain. (3 marks) (b) Assume Tai Fat Ltd recognized the government grant as deferred income. Show the journal entries for the year ended 2020 for Tai Fat Ltd. (14 marks) Prepare the extracts of statement of financial position and the statement of (13 marks) profit or loss for the year ended 31 December 2020. Show your workings

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