【每日一练】ACCA F7（Sep 2016）
Please use the grid provided on page two of the Candidate Answer Booklet to record your answers to each multiple choice question. Do not write out the answers to the MCQs on the lined pages of the answer booklet.
Each question is worth 2 marks.
On 1 January 20X6, Gardenbugs Co received a $30,000 government grant relating to equipment which cost $90,000 and had a useful life of six years. The grant was netted off against the cost of the equipment. On 1 January 20X7, when the equipment had a carrying amount of $50,000, its use was changed so that it was no longer being used in accordance with the grant. This meant that the grant needed to be repaid in full but by 31 December 20X7, this had not yet been done. Which journal entry is required to reflect the correct accounting treatment of the government grant and the equipment in the financial statements of Gardenbugs Co for the year ended 31 December 20X7?
A Dr Property, plant and equipment $10,000
Dr Depreciation expense $20,000
Cr Liability $30,000
B Dr Property, plant and equipment $15,000
Dr Depreciation expense $15,000
Cr Liability $30,000
C Dr Property, plant and equipment $10,000
Dr Depreciation expense $15,000
Dr Retained earnings $5,000
Cr Liability $30,000
D Dr Property, plant and equipment $20,000
Dr Depreciation expense $10,000
Cr Liability $30,000
Answer：
A
The repayment of the grant must be treated as a change in accounting estimate. The carrying amount of the asset must be increased as the netting off method has been used. The resulting extra depreciation must be charged immediately to profit or loss.
Original As if no grant Adjustment
Cost 90,000 90,000
Grant (30,000)
–––––––
60,000
Depreciation (10,000) [1 yr] (30,000) [2 yr] Dr Depn exp 20,000
––––––– –––––––
Carrying amount 50,000 [1/1/X7] 60,000 [31/12/X7] Dr PPE 10,000
Cr Liability 30,000
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