Mathematics · Financial Accounting
Aman Co and Berik Co are identical entities that purchased the same machine on 1 July 20X4 for $400,000. The machine has a 5-year useful life and no residual value. Both companies received a government grant of $80,000 on the same date. Aman Co uses the 'Netting-off' method (deducting the grant from the asset's cost). Berik Co uses the 'Deferred Income' method. Both companies have a financial year-end of 31 December. Which of the following statements correctly describes the impact of these methods on the financial statements for the year ended 31 December 20X4?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Aman Co will have a higher Net Asset Turnover ratio than Berik Co.
- 2Both companies will report the same 'Net Profit for the Year,' but Berik Co will have a higher Return on Capital Employed (ROCE).
- 3Berik Co will report a higher Carrying Amount for the machine than Aman Co.✓
- 4Aman Co will report a higher Operating Profit than Berik Co.
Correct answer
Berik Co will report a higher Carrying Amount for the machine than Aman Co.
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