Accounting for government grant
Gorgen Corp. qualified for a 25% government grant that would assist the company in the purchase of machinery for its manufacturing operations. The cost of the machinery is $ 200,000 and the new asset has an estimated useful life of 16 years.
Instructions
a)Assuming that Gorgen uses the cost reduction method, prepare the journal entries to record the purchase of the machinery and the receipt of the government grant.
b)Assuming that Gorgen uses the deferral method, prepare the journal entries to record the purchase of the machinery, the receipt of the grant, and the adjusting entry required at the end of the first year (assuming the machinery was purchased on the first day of the fiscal year).

Question

Accounting for government grant
Gorgen Corp. qualified for a 25% government grant that would assist the company in the purchase of machinery for its manufacturing operations. The cost of the machinery is $ 200,000 and the new asset has an estimated useful life of 16 years.  
Instructions
a)Assuming that Gorgen uses the cost reduction method, prepare the journal entries to record the purchase of the machinery and the receipt of the government grant.
b)Assuming that Gorgen uses the deferral method, prepare the journal entries to record the purchase of the machinery, the receipt of the grant, and the adjusting entry required at the end of the first year (assuming the machinery was purchased on the first day of the fiscal year).

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The Answer of Accounting for government grant
Gorgen Corp. qualified for a 25% government grant that would assist the company in the purchase of machinery for its manufacturing operations. The cost of the machinery is $ 200,000 and the new asset has an estimated useful life of 16 years.  
Instructions
a)Assuming that Gorgen uses the cost reduction method, prepare the journal entries to record the purchase of the machinery and the receipt of the government grant.
b)Assuming that Gorgen uses the deferral method, prepare the journal entries to record the purchase of the machinery, the receipt of the grant, and the adjusting entry required at the end of the first year (assuming the machinery was purchased on the first day of the fiscal year).

Accounting for Government Grant