Outback Co received a $360 000 grant from the government on 1 July 2022. One of the conditions attached to the grant was that Outback Co had to continue farming in the same location for the next 3 years; otherwise the grant would have to be returned in full. The entry to record the receipt of the grant on 1 July 2022 is:

Question

Quizplus · Accepted Answer

The correct answer is B) DR Cash $360 000; CR Performance obligation $360 000. This is because the grant is conditional upon Outback Co continuing farming in the same location for the next 3 years. The grant cannot be recognized as revenue immediately upon receipt due to the condition that must be met. Instead, it is recorded as a liability (performance obligation) until the conditions are fulfilled.

Outback Co Received a $360 000 Grant from the Government