Cranston LTD. prepares its financial statements according to International Financial Reporting Standards. In October 2021, the company received a $5 million government grant. The grant represents 20% of the total cost of equipment that will be used to improve the roads in the local area. Cranston recorded the grant and the purchase of the equipment as follows: Cash 5,000,000 Revenue 5,000,000 Equipment 25,000,000 Cash 25,000,000 Required: 2. Prepare the correcting entries required under the two alternative accounting treatments allowed under IFRS.

Alternative 1:

Debit Revenue $5,000,000

Credit Equipment $5,000,000

Alternative 2:

Debit Revenue $5,000,000

Credit Deferred revenue $5,000,000

Explanation:

Preparation of the correcting journal entries required under the two alternative accounting treatments allowed under IFRS

Based on the information given if in the October 2021, the company received the amount of $5 million as government grant in which we were told that the grant represents 20% of the total cost of equipment which means that the correct journal entries required under the two alternative accounting treatments allowed under IFRS will be :

Alternative 1:

Debit Revenue $5,000,000

Credit Equipment $5,000,000

Alternative 2:

Debit Revenue $5,000,000

Credit Deferred revenue $5,000,000

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