- 15 Marks
Show how Karla Ltd's three grants are reflected in financial statements for year ended 30 June Year 2, with options per IAS 20.
Question
During the year ended 30 June Year 2, Karla Ltd received three grants, the details of which are set out below.
(1) On 1 September, a grant of GH₵40,000 from local government. This grant was in respect of training costs of GH₵70,000 which Karla Ltd had incurred.
(2) On 1 November Karla Ltd bought a machine for GH₵350,000. A grant of GH₵100,000 was received from central government in respect of this purchase. The machine, which has a residual value of GH₵50,000, is depreciated on a straight-line basis over its useful life of five years.
(3) On 1 June, a grant of GH₵100,000 from local government. This grant was in respect of relocation costs that Karla Ltd had incurred moving part of its business from outside the local area. The grant is repayable in full unless Karla Ltd recruits ten employees locally by the end of Year 2. Karla Ltd is finding it difficult to recruit as the local skill base does not match the needs of this part of the business.
Required
Show how the above transactions should be reflected in the financial statements of Karla Ltd for the year ended 30 June Year 2. Where any accounting standards allow a choice you should show all possible options.
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