You are required to write necessary treatments per IFRS 15. Also show the net effect of this transaction on the financial statements of the firm.
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A company entered into a contract with one of the customer to supply a sophisticated machinery for 200,000 on 01/07/2020. The Contract is coming with selling a machinery, 3 years maintenance and a one-year replacement guarantee. The stand-alone selling price of machinery is 120,000, the replacement guarantee costs 10,000 and free services expected to costs the company 20,000. As per the terms of sales, the customer may pay to the firm either on 01/01/2020- 200,000, 01/03/2020- 210,000 or 01/05/2020- 225,000. As per past experience there is high probability that the customer pays on 01/05/2020.
You are required to write necessary treatments per IFRS 15. Also show the net effect of this transaction on the financial statements of the firm.
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- On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.Zoro Company enters into a contract to sell Product A and Product B on July 1, 2020 for an upfront cash payment of P250,000. Product A will be delivered at the end of the year, and Product B will be delivered the following year. Zoro Company sells Product A for P80,000 and Product B for P240,000. 1. How many performance obligations are there in the contract? 2.what is the transaction price? 3.how much is revenue to be recognized in 2020? 4. how much is revenue to be recognized in 2021?
- SorCo. Inc. has just entered into a sale agreement with a customer. The contract is for $600,000. However, the payments will be made as follows: 1 August 20X1 on date of delivery $400,000; 1 August 20X2 $100,000 and 1 August 20X3 $100,000. SorCo has estimated that the interest rate required for this customer is 8%. SorCo follows IFRS. Required: Prepare the journal entry required to record the sale on 1 August 20X1 and the receipt of cash on 1 August 20X2 and 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to the nearest whole dollar.)A company enters into a contract to build a factory for a customer. The agreed price is P2M and the specified completion date is 31 October 2019. However, the contract provides that the company should receive an incentive payment of a further P250,000 if the factory is completed by 30 September 2019. Similarly, the price will be reduced by P250,000 if the factory The company estimates that there is a 15% probability that the factory will be completed by 30 September 2019, an 80% probability that it will be completed in October 2019 or November 2019 and a 5% probability that it will not be completed until after 30 November is not completed until after 30 November 2019. 2019. 20. What is the expected value of the transaction price for this contract? a. P2M C. P1.975M b. P2.125M d. P2.025MFor each unit of computer sold, Blue Company sells a service contract. The contract provides that the computers sold will be repaired by the company within a period of three years from the date of sale. Based on company’s experience, 10% of repairs are done in the 1st year from the date of sale, 30% in the 2nd year and 60% in the 3rd year. Sale of service contracts for the year 2019, 2020 and 2021 are; P500,000; P600,000 and P700,000 respectively. Sale of service contracts and repairs are made evenly throughout the year. How much is the unearned service contract revenue at December 31, 2021?
- Beautiful Company sold a set of washing machine and a dryer for a total contract price of P100,000 on December 15, 2021. The stand-alone selling prices of the washing machine and the dryer if sold separately are: 150,000 and 70,000, respectively. The washing machine was delivered on December 20, 2021 but the dryer was delivered only on January 5, 2022. *How many performance obligations are there in the contract? *How much is the revenue to be recognized in 2021? *How much is the revenue to be recognized in 2022?On 1 October 2020, ABC Limited sold three machines to a customer for a total amount of R 1 900 000. The three machines were delivered to the premises of the customer on the same day. Included in the sales contract are 1-year warranties for all three of the machines. A warranty for each of these machines may cost R 20 000 to obtain. The customer received a trade discount of 10 % for both tractors. ABC Limited awards a settlement discount of 6% to any customer who settles their account in full within 30 days of making a purchase. This particular customer often buys machinery from ABC Limited and based on past dealings with the customer ABC Limited expects that the customer will settle their account within 30 days. The customer settled their account in full on 3 November 2020. How many performance obligations are contained in the contract? 01 2 3 06A company enters into a contract to build a factory for a customer. The agreed price is $3,000,000 and the specified completion date is 31 December 2021. However, the contract provides that the company should receive an incentive payment of a further $300,000 if the factory is completed by 30 November 2021. Similarly, the price will be reduced by $300,000 if the factory is not completed until after 31 January 2022. The company estimates that there is a 15% probability that the factory will be completed by 30 November 2021, an 80% probability that it will be completed in December 2021 or January 2022 and a 5% probability that it will not be completed until after 31 January 2022. What is the expected value of the transaction price for this contract? $3,030,000 $3,000,000 $2,985,000 $3,045,000
- Brainy Company started the construction of a building for a customer at a fixed contract price of P2,000,000 on January 1, 2019. On the same date, the customer paid a mobilization fee equal to 5% of contract price that will be deductible from the first billing. The outcome of construction contract can be estimated reliably except in 2019 which is the start of the project. The company billed the customer equivalent to 30%, 20% and 40% of the contract price during 2019, 2020 and 2021, respectively. The remaining billing was made at the year of completion of the project. The company made collection from the customer at the end of 2019, 2020 and 2021, in the amount of P240,000, P900,000 and P360,000, respectively. Direct costs related to the said project (see image below).1. What is the Percentage of completion in 2020? 2. How much is the Construction Revenue to be recognized in 2020? 3. How much is the Gross Income (Loss) to be recognized in 2021? 4. How much is the balance of Account…Careful Company sells goods that cost P600,000 to a customer for P800,000 on December 20, 2021. The sales price includes an installation fee, which is valued at P80,000. The fair value of the goods is P740,000. The installation is considered a separate performance obligation and is expected to take 3 months to complete. *How many performance obligations are there in the contract? *How much is the revenue to be recognized in 2021 and 2022?On December 1, 2020, Platform, Inc. entered into a 1-year contract with a multinational financial services giant to provide air transport to its executives. Under the contract, Platform will be paid EUR 1,000 per kilometer for 12,000 minimum guaranteed kilometers per annum. Payment shall be made at the end of each quarter. Platform obtained an aircraft on a wet lease (i.e., a lease of aircraft together with crew and maintenance, etc.). Since almost all of Platform's costs are denominated in USD, it enters into a 3-month forward contract to sell EUR 3,000,000 forward at USD 1.5/EUR. At its financial year end, i.e., December 31, 2020, USD had appreciated to 1.45/EUR and the company had operated a total of 1,000 kilometers over the one-month period. By the end of February 2021, i.e., at the end of first quarter of the contract, the company had provided services for 3,100 kilometers. Exchange rate at the quarter end was USD1.44/EUR. Provide journal entries for Platform's hedging activity…