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Lee Company received an HK$1,800,000 subsidy from the government to purchase manufacturing equipment on January, 2, 2011.The equipment has a cost of HK$3,000,000, a useful life a six years, and no salvage value.Lee depreciates the equipment on a straight-line basis.
-If Lee chooses to account for the grant as deferred revenue, the grant revenue recognized will be:

Question

Quizplus · Accepted Answer

If Lee chooses to account for the grant as deferred revenue, the grant revenue recognized will be spread equally over the useful life of the equipment, which is six years. Therefore, HK$1,800,000/6 = HK$300,000 per year for the years 2011-2016.

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