Neco 2017 Financial Accounting Question 6

During the financial year, a government department received a multi‑year grant of \( \text{₦}12,000,000 \) to be used equally over three years. In Year 2 an additional supplementary grant of \( \text{₦}1,500,000 \) was received, to be recognised equally over the remaining two years. The department follows the accrual basis and recognises grant revenue in proportion to the expenses incurred, up to the amount allocated for the year. At the end of Year 1 expenses were \( \text{₦}3,200,000 \) and at the end of Year 2 expenses were \( \text{₦}3,800,000 \). In Year 3 the department incurred expenses of \( \text{₦}5,000,000 \). Determine (a) the amount of grant revenue that should be recognised in Year 3, and (b) the closing balance of the Grant Receivable account at 31 December Year 3.