Brightspark Limited a manufacturer of light bulbs recently received a government grant of C 300 000 to assist with the company cash flows pursuant to the purchase of a glass blower for C 500 000 on 1/1/20X8. A condition placed on this grant required Brightspark to produce 10,000 light bulbs for the new parliament buildings by 31/12/20X9. Failure to comply with part or this entire requirement would cause a proportionate amount of the grant to be repayable.
• For the 20X8 financial year Brightspark produced and installed 6,000 light bulbs in the new parliament building. However due to frequent power cuts during 20X9 only 2,000 of the government light bulbs were produced and installed in 20X9.
• The useful life of the glass blower was 5 years
a) Prepare journal entries for the years ended 31 December 20X8 and 20X9, accounting for the grant and the glass blower assuming Bright spark has a policy of accounting for the grant as deferred income.
b) Prepare journal entries for the years ended 31 December 20X8 and 20X9, accounting for the grant and the glass blower assuming Bright spark has a policy of writing off the grant against the asset.