o other customers without the support service for £700,000 and has other service contracts providing similar
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QUESTION 1:
A) A Ltd sells computer software to B Ltd on 1 Jul 20X8 for £800,000, a price which includes the provision of a support service for 2 years.
A Ltd sells this software to other customers without the support service for £700,000 and has other service contracts providing similar support at a price of £150,000 per annum.
What should be recognised for the year ended 31 December 20X8 according to IFRS 15 Revenue from Contracts with Customers?
B)
Venus Ltd has a contract to supply catering services to a retail company and it is to be supplied evenly over two year period from 1 Oct 2017- 31 Sep 2019. The agreed contract price is £240,000. The year end is 31 Dec.
Identify what to recognize in Income Statement for 31 Dec 2018?
C) A furniture retailer sells goods to a customer for £80,000 on 1 January 2020 Delivery will take place immediately and the company has given the customer an interest-free credit period of 36 months. Discount rate is 6%.
What is recognized for the year-end 31 Dec 2020.
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- On 1 January 2022 (the contract date), Furniture Ltd sold R1 200 000 worth offurniture to a new housing development in Centurion. Furniture Ltd immediatelycredited their sales revenue with the R1 200 000. Included in the sales contract, wasa complementary servicing arrangement in which Furniture Ltd would provide thecustomer with annual servicing of the furniture (in case of any breakages ormanufacturing faults) for a period of three years from the date of the contract.The normal selling price of the furniture without any annual servicing is R1 400 000.The normal price charged to customers for annual servicing is R14 000.REQUIRED:Calculate the amount of revenue that Furniture Ltd should recognise, for thefinancial year end of 30 June 2022, with respect to the transaction above.Ignore the time value of money and VAT.8 On 1 January 20X8, an entity enters into a contract to transfer Products A and B to a customer in exchange for P1,000. The contract requires Product A to be delivered first and states that payment for the delivery of Product A is conditional on the delivery of Product B. The stand-alone selling prices of Products A and B are P480 and P720, respectively. Product A is delivered on January 3, 20X8 while Product B is delivered on March 31, 20X8. The customer pays on April 8, 20X8. Requirement: Provide the journal entries. 9. Use the facts in the immediately preceding problem. In addition, the contract also includes a promise to transfer Product D. Total consideration in the contract is P130. The stand-alone selling price for Product D is highly variable because the entity sells Product D to different customers for a broad range of amounts (P15 - P45). Requirement: Allocate the transaction price to the performance obligations in the contract.X On 1 January 2021 Bob Company sells an item of machinery to Jaison Company for its fair value of $300,000. The asset had a carrying amount of $120,000 prior to the sale. The sale represents the satisfaction of a performance obligation, in accordance with IFRS 15 Revenue from Contracts with Customers. Bob Company enters on to a contract with Jaison Company for the right to use the asset for the next five years. Annual payments of $50,000 are due at the end of each year. The interest rate implicit in the lease is 10%. The present value of the annual lease payments is $190,000. The remaining useful life of the machine is much greater than the lease term. Required: 1. Explain how it will be recorded in the books of Bob Company and show the necessary journal entries. 2. Why do companies prefer lease financing instead of direct purchase? Explain any three valid reasons.
- 65 On January 1, 20x20, an entity granted a franchise to a franchisee. The franchise agreement required the franchisee to pay a nonrefundable upfront fee in the amount of P400,000 and on-going payment of royalties equivalent to 5% of the sales of the franchisee. The franchisee paid the nonrefundable upfront fee on January 1, 20x20. In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render the following performance obligations: To construct the franchisee’s stall with stand-alone selling price of P200,000. To deliver 10,000 units of raw materials to the franchisee with stand-alone selling price of P250,000. To allow the franchisee to use the entity tradename for a period of 10 years starting January 1, 20x20 with stand-alone selling price of P50,000. On June 30, 20x20, the entity completed the construction of the franchisee’s stall. On December 31, 20x20, the entity was able to deliver 3,000 units of raw materials to the…Q7:-On 1st January, 2012 A sells a truck to B, on the instalment payment system, on the following conditions : (1) The purchase price of the truck is $ 1,00,000. (2) This amount is payable to A in four equal annual instalments along with 12% interest per annum on the outstanding balance, the first instalment being payable on the date of sale. (3) B in turn, hires out the truck to A for a monthly hire of $ 3,000 per month from 1st January, 2012. The hire charges are to be adjusted, at the end of each year, against the amount due to A on account of principal and interest, any difference being settled in cash. B, charges 20% depreciation (on the written-down-value method) on the truck. All payments are made as per the agreement. On 1st January 2015, the truck is sold by B to A for $ 15,000 in cash. Show in B’s books, Truck Account, Interest Suspense Account and A's Account.Supposing we the contract entered in is at the price of $285. We would like to evaluate our position with respect to gain or loss accrued on the forward contract 4 months later where the price of the asset is $293.15. The market value of the forward contract at this point in time from our perspective would be: a. -$17.14 b. $8.15 c. -$8.15 d. $17.14
- Enterprise Solutions Inc. licenses its productivity software to Blackmon Company for 100,000, payable at contract inception. Enterprise agrees to provide semiannual software upgrades over the 5-year length of the contract to enable Blackmon to benefit from any technological advancement. Enterprise concludes that the software license is not distinct from the promised upgrades. What journal entries are necessary for Enterprise to account for this transaction?Problem 1On December 31, 2021, RAP, Inc. authorized JIN to operate as a franchiseefor an initial franchise fee of P150,000. Of this amount, P60,000 wasreceived upon signing the agreement, and the balance, represented by anote, is due in three annual payments of P30,000 each, beginning December31, 2022. The present value on December 31, 2021 of the three annualpayments appropriately discounted is P72,000. According to theagreement, the nonrefundable down payment represents a fair measure ofthe services already performed by RAP, however, substantial future servicesare required of RAP. Collectability of the note is reasonably certain.On December 31, 2021, RAP should record unearned franchise fees in respectof the JIN franchise ofA. 150,000 C. 72,000B. 90,000 D. -0-1. On October 1, 2021, Arvene Corp. purchased goods from US based corporation worth 50,750 US dollars. Payment is due in 120 days on January 30, 2022. In view of the transaction, Arvene Corp. entered into a forward contract to buy 50,750 US dollars from PNB in 120 days. The relevant rates are as follows: 10/01/21 12/31/21 01/30/22 Spot rate P 53 P 55 P 53.50 Forward rate 54 56.50 55 How much is the net forex loss on settlement date?
- A. On January 1, 2020, Machinery Corp. enters into a contract with a customer for the sale of a machine and relatedone-yearmaintenance services for a total contract price of P2,000.000. Machinery Corp. regulariy sells these items separately. If they were to be purchased separately, their stand-alone selling prices are as follows: • P1,800,000 for the machine; and P600,000 for the one-year maintenance services Machinery Corp transfesthe machine, andcolects the total contract price, on February 1, 2020. The maintenance services start on that date. Required: Analyze the five steps of model of revenue recognition.Question 11. C Ltd has a fiscal year end of Sep. 30th. On Oct. 1, 20X8 C Ltd leases an asset to a lessee for a term of five years. The lessee is required to make five lease payments of £27,500, starting with Oct 1, 20X8. The fair value of the asset on Oct 1, 20X8 is £113,500. C Ltd incurs initial direct costs of £421 and the rate of interest implicit in the lease is 12%. At the end of the lease term, ownership of the asset will remain with C Ltd, the asset is expected to have come to the end of its economic life and to have a residual scrap value of £5,100. i) Provide two reasons for why this lease is a finance lease and not an operating lease. ii) Calculate the net investment in the lease at commencement. iii) Prepare lessor's journal entries for the year ending Sep. 30th, 20X9.On January 1, 2018, an entity enters into a contract to transfer Products C and D to a customer in exchange for P1,000. The contract requires Product C to be delivered first and states that payment for the delivery of Product C is conditional on the delivery of Product D. The stand-alone selling prices of Product C and D are P480 and P720, respectively. Product C is delivered on January 3, 2018 while Product D is delivered on March 31, 2018. The customer pays on April 8, 2018. How much is the balance of contract liability on January 3, 2018?