Question

Windsor Enterprises purchased a new piece of equipment for its factory under a new government incentive program in exchange for cash. The equipment cost $147,000 and had an estimated useful life of 10 years. The program was intended to encourage companies to invest in new, innovative technologies. The new piece of equipment purchased by Windsor qualified for a government grant of $20,600. Windsor collected the grant after providing proof of the purchase.

Assuming that Windsor uses the cost reduction method, prepare the journal entries to record the purchase of the equipment and the receipt of the government grant. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record purchase of equipment) (To record collection of government grant) eTextbook and Media Assuming that Windsor uses the deferral method, prepare the journal entries to record the purchase of the equipment, the receipt of the grant, and the adjusting entry required at the end of the first year (assuming the equipment was purchased on the first day of the fiscal year). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Credit Account Titles and Explanation Debit (To record purchase of equipment) (To record collection of government grant) (To record year end adjusting entry)

Answer 1

Information Given -

Windsor Enterprises purchased a new piece of equipment for its factory under a new government incentive program in exchange for cash.

The equipment cost $147000 and had an estimated useful life of 10 years.

The new piece of equipment purchased by Windsor qualified for a government grant of $20600.

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(1) -- Assuming that Windsor uses the Cost reduction method, prepare the journal entries to record the purchase of the equipment and the receipt of the government grant.

Answer -

Journal of Windsor Enterprises

Account Titles and Explanation	Debit ($)	Credit ($)
Equipment Cash (To record purchase of equipment)	147000 -	- 147000
Cash Equipment (To record collection of government grant)	20600 -	- 20600

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(2) -- Assuming that Windsor uses the Deferral method, prepare the journal entries to record the purchase of the equipment, the receipt of the grant, and the adjusting entry required at the end of the first year.

Answer -

Journal of Windsor Enterprises

Account Titles and Explanation	Debit ($)	Credit ($)
Equipment Cash (To record purchase of equipment)	147000 -	- 147000
Cash Deferred Grant income (To record collection of government grant)	20600 -	- 20600
Deferred Grant income [$20600 / 10 years] Income Statement (To record year end adjusting entry)	2060 -	- 2060