ACCA FR · Chapter 2 · Question 8 of 11
On 1 April 20X6 Puffin Co received a government grant of $300,000 towards a machine costing $1,200,000, which it bought and brought into use on that date. The machine has a 5-year useful life and no residual value. Puffin Co uses the deferred income method and has a 31 December year end. What non-current liability for deferred income should be shown at 31 December 20X6?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $195,000
Explanation
Annual release = $300,000 / 5 = $60,000. Released in 20X6 = $60,000 x 9/12 = $45,000, so the deferred income balance at 31 December 20X6 = $300,000 - $45,000 = $255,000. The amount to be released in the next 12 months ($60,000) is current, so the non-current part is $255,000 - $60,000 = $195,000.
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