e revenue and current assets include £106,500 referring to Sandcast plc. On 1 October 2022, Enola plc agreed a c
The revenue and current assets include £106,500 referring to Sandcast plc. On 1 October 2022, Enola plc agreed a contract with Sandcast plc to source and install Interactive Displays and Audio systems (IDAS) across Sandcast’s 10 nationwide offices and to provide ongoing technical support for five years following the installation. The contract price was agreed at £150,000. Enola plc normally charges £140,000 for the similar system and £12,000 per year for the technical support. It was also agreed that Enola plc would send an invoice Sandcast plc following the successful installation of the IT system and the payment is due 60 days from the date of complete installation. The installation of the new system was expected to be completed on 1 November 2022 and Sandcast was entitled to access the technical support facility from the same date. Enola plc sent the invoice on 15 November 2022 and recognised the revenue in its book. However, due to the worldwide computer chip crisis, the engineering team could not complete the installation before 15 December 2022. On 15 December 2022, the engineering team issued the job completion report and dispatched it to the accounts department confirming the successful installation of IDAS.
Requirements:
The accountant who posted Enola plc’s sales in Note 1 is now worried that they treated this incorrectly. They come to you asking for help. Prepare a brief note for them showing the correct treatment and explaining why the correct treatment is consistent with International Financial Reporting Standards.
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