Neco 2022 Financial Accounting Question 46

If a local government receives a grant of \(\text{₦}5,000,000\) to construct a community hall, the grant is receivable on receipt but a condition requires that at least 60% of the grant be spent on construction within the fiscal year, otherwise the unspent portion must be returned. By year‑end the department has incurred construction costs of \(\text{₦}3,200,000\), of which \(\text{₦}800,000\) relates to furniture (capitalised as equipment) and the remainder to building work. The department also incurred operating expenses of \(\text{₦}500,000\) unrelated to the grant. Determine the amount of grant revenue to be recognised in the statement of financial performance for the year, and the amount of unspent grant that must be deferred as a liability.