Company X was given land by a local developer as an incentive for the company to locate in a recently developed industrial park. The fair value of the land is $50,000.
Record the acquisition.
An Incentive is recognised only when there is reasonable assurance that (a) the entity will comply with any conditions attached to the grant and (b) the grant will be received.
Non-monetary grants, such as land or other resources, are usually accounted for at fair value, although recording both the asset and the grant at a nominal amount is also permitted.
ThereIn the above scenerio we need to recognise the whole fair value amount of land in Profit or loss account since there is no cost for acquiring the land.
Accounting entry would be
Profit and loss A/s Dr $50,000
To Incentive A/c $50,000
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