Question Details

The account Deferred Grant Revenue is classified as 



S1.	Which of the following is the recommended approach to handling interest incurred in financing the construction of property, plant and equipment?
a.	Capitalize only the actual interest costs incurred during construction.
b.	Charge construction with all costs of funds employed, whether identifiable or not.
c.	Capitalize no interest during construction.
d.	Capitalize interest costs equal to the prime interest rate times the estimated cost of the asset being constructed.

	2.	Interest revenue earned on specific borrowings for qualifying assets
a.	reduces the cost of the qualifying asset.
b.	reduces interest expense reported on the income statement.
c.	increases equity in the period earned.
d.	none of these.

	3.	If a government entity provides an interest free loan to a company and the company accounts for the grant using the deferred revenue approach,
a.	no interest expense will be recorded.
b.	the interest element is initially recorded as Discount on Noted Payable.
c.	the interest element is amortized to Deferred Grant Revenue over the term of the loan.
d.	all of these.
	4.	Which of the following is not true with regard to the accounting for government grants?
a.	Assets may be recorded at fair value or nominal cost.
b.	Companies may use either the capital or income approach to account for the asset and the grant.
c.	Companies may apply the income approach either by recording the grant as deferred revenue or as an adjustment to the asset.
d.	Both a and c.


	5.	The account Deferred Grant Revenue is classified as 
a.	a separate component of shareholders' equity.
b.	a non-current liability.
c.	Other income and expense.
d.	Revenue.




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