CASE STUDY Surgimed Ghana Ltd. operates in the medical supply industry and specializes in sales and installation of medical equipment and devices such as hospital furniture, medical equipment,...

CASE STUDY
Surgimed Ghana Ltd. operates in the medical supply industry and specializes in sales and installation of medical equipment and devices such as hospital furniture, medical equipment, electronic equipment, local area networking with a station monitoring and general telecom networking. The company is noted for installation of Sterilization Units, X-Ray machines and Ultrasound scanners,Installation of Medical Gas Pipe Lines and Operation Theater Requirements around the country. At the end of the 2020 financial year, the directors of the company were not sure whether they have

treated the following transactions in their financial statements ending 31st December, 2020 correctly

Transaction E
Surgimed Ghana Ltd. received a government grant of GH¢300,000 for acquiring plant and machinery costing GH¢1,500,000 during 2017 financial year and having a useful life of 10 years. The grant received was credited to deferred income in the statement of financial position as a result of adopting the deferred income approach of accounting for government grant. During the 2020 financial year,the company had to refund the grant to the government due to non-compliance of the conditions laid

down for the grant.

REQUIRED

Explain the effect on the cost of the plant and machinery, and the amount of depreciation that should be charged during the 2020 financial year financial statements.