Question 1

**Section A**

EcoPlastics received a $500,000 government grant on 1 January 20X2 to purchase a recycling machine costing $2,000,000 (useful life 10 years). EcoPlastics uses the deferred income method. On 1 January 20X4, EcoPlastics breached the grant conditions and had to repay the full $500,000.

What is the charge to profit or loss in the year ended 31 December 20X4 as a direct result of the repayment?

Accepted Answer

Calculate the unamortized deferred income balance at the date of repayment. The repayment is applied against this balance first. Any excess repayment over the deferred income balance is recognized immediately as an expense.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Charging the full $500,000 repayment to profit or loss.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 4

More questions from this exam