On January 1, 2020, Pharoah Company purchased a varnishing machine for P6,000,000. The entity received a government grant of P540,000 in respect of this asset. The accounting policy is to depreciate...

This topic is about government grants. Choose the letter of correct answer.

Extracted text: On January 1, 2020, Pharoah Company purchased a varnishing machine for P6,000,000. The entity received a government grant of P540,000 in respect of this asset. The accounting policy is to depreciate the asset over 4 years on a straight line basis and to treat the grant as deferred income. What amount should be reported as deferred income on December 31, 2021? a. 270,000 b. 405,000 c. 135,000 d. 540,000