Mozambique Ltd. received a $ 250,000 grant from the federal government to help buy equipment as an incentive for them to establish manufacturing operations in Ottawa. Assuming that Mozambique uses the cost reduction method for such transactions, they should record this transaction as a

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Quizplus · Accepted Answer

Under the cost reduction method, a grant related to assets, like the one received by Mozambique Ltd., is recorded by reducing the cost of the asset. Therefore, the grant is credited directly to the Equipment account, reducing the asset's net book value.