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| What |
Journal entries are the initial recording of all the monetary business transactions in a systematic order. They are recorded in chronological order as per the occurrence of the event. There are various types of journal entries such as: adjusting entries, closing entries, and regular entries.
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- ONE Computer Solution (“ONE") provides IT solutions to corporate clients. ONE offered a price of $2,400 to Client A if he purchases an accounting software from them and choose them to do the installation. Client A agreed and entered into a contract with ONE on 1 January 2022. ONE normally charges clients $2,000 as a standalone selling price for acquiring the accounting software, at a cost of $1,100. The installation service has a standalone selling price of $500. Client A paid ONE $2,000 upon delivery and the remaining balance upon installation of the software. The accounting software was delivered on 1 February 2022. ONE completed installation on 1 March 2022 and client A paid the balance due. Required: (a) Allocate the transaction price between the accounting software and installation service. (b) Prepare the journal entries on the following date (Note: If no entry is required, state “no entry" and write down the reason to support your answer): (i) 1 January 2022. (ii) 1 February…CleanAir Ltd (CAL) is a company specializing in design and installation of air-purifying systems in residential, office and light commercial properties. It sells air purifiers (with brand name of “FreeAir”) as part of a combined contract which includes a standard two-month warranty term to ensure the quality of FreeAir and maintenance services for a ten-year period. The sale price for the combined contract is $5.4 million. If sold separately, the standalone selling price of the FreeAir would be $4.8 million and the standalone selling price of the ten-year maintenance service contract would be $1.35 million. The standard two-year warranty would not be offered without the FreeAir, so the standalone selling price is estimated to be zero.CAL purchased a patent on 1 January 2017 for $15 million from a world class scientist who has registered the patent on 1 January 1972. The legal right of the patent was set at 50 years from the date the patent was originally registered and the patent was…Able Equipment entered into an arrangement to provide M. T. Bin Wholesale’s data center with Able’s newest server model. Due to security processes in place for its customer data, M. T. Bin requires access to the equipment and the ability to direct its use. Able can replace or reconfigure the equipment if Able finds it’s financially advantageous to do so. Does the contract contain a lease?
- Super Clubs Hotels, Inc. has signed a service outsourcing contract with Quality Rooms, Inc. for $3 million, which was received in cash at contract inception. Under the agreement, Quality Rooms is obligated to clean and prepare over 5,000 hotels rooms managed by Super Clubs on a daily basis from September 1, 2020 to August 31, 2021. Required: Prepare any journal entry that Quality would record: (1) at inception of the contract and (2) at the end of 2020 to recognize all revenue associated with this contract that should be recognized in 2020.Software Supplier Inc. sells to a customer a perpetual software license and post-contract customer support for a 12-month period, commencing at the time that the software is activated. Software Supplier Inc. charges $240 upfront when the software is purchased and $16 a month for 12 months, due at the end of the month. Software Supplier Inc. sells the software separately for $320 while the standalone selling price of the post-contract customer support is $160. Note: Carry all decimals in calculations; round the final answer to the nearest dollar. Note: If a journal entry (or a line of the journal entry) isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). a. How should the transaction price be allocated among the performance obligation(s)? Performance Obligations Transaction Price as Stated Standalone Selling Price Allocated Transaction Price (rounded) Software Customer support $ $ Account Name To record sale of software.…NCH Bhd signed a lease agreement to lease one piece of computer equipment with KHL Bhd on 1 January 2022 with a lease rental of RM150,000 each per annum at the end of each financial year for 5 years. NCH Bhd also needs to pay an installation fee amounting to RM5,000. The lease agreement specifies that NCH Bhd has full control over the use of the computer equipment throughout the arrangement period. The estimated useful life of the computer equipment is five years and the guaranteed residual value at the end of the lease period is RM20,000. The lease rental was calculated and mutually agreed upon with a 10% rate of return. It is the policy of the company to adopt a cost model to initially and subsequently measure its property, plant and equipment, and the straight-line method is adopted to depreciate the property, plant and equipment. Required: a. b. Year (n) Discount factor at 10% [Single] (i) Discount factor at 10% [Annuity] (i) C. 1 0.9091 0.9091 2 3 4 5 0.8264 0.6830 0.6209 0.7513…
- Lark Corp. appropriately determined that each of its long-term projects represents a single performance obligation that is satisfied over time. At the end of the current year, Lark estimates that its costs to complete a project exceed the contract price, so that an overall loss on the contract is anticipated. Required: What journal entry will Lark record at the end of the current year, given the following information? • Revenue to date is $350,000 ($175,000 of which is to be recognized in the current year). • The expense recognized previously was $100,000. • An overall loss of $30,000 is anticipatedCarla Vista Inc., a registered broker, enters into a finder's fee agreement with Wildhorse Homes Ltd. on June 15, 2023. Carla Vista will find leads in the form of buyers potentially interested in purchasing Wildhorse's real estate holdings. Along with finding potential buyers, Carla Vista helps negotiate the selling price and provides advice on contract details. If and when Wildhorse closes a sale, Carla Vista will be paid within 30 days of the closing date, based on the following formula: 5% of any transaction value up to and including $1 million, plus 4% of any transaction value greater than $1 million and less than and including $2 million, plus 3% of any transaction value greater than $2 million and less than and including $3 million, plus 2% of any transaction value greater than $3 million and less than and including $4 million, plus 1% of any transaction value in excess of $4 million. If Carla Vista uses another broker and this information is not shared with Wildhorse, the fee is…Sirius XM Holdings Incorporated sells a dash-top satellite radio receiver and one-year subscription for a total price of $80. By purchasing this deal, the subscriber is entitled to receive hardware (i.e., the radio), a software update that is automatically downloaded every second month to the radio, and continuous music service for one year from the date the hardware is delivered.Required:Identify the performance obligation(s) in this contract, and indicate whether the revenue should be recognized at a Point in time or Over time for each identified performance obligation. If the Performance Obligation is "No", then mark the Revenue recognized column with "Not affected".
- On May 1, 2021 Race Cars Inc. enters into a contract with a major U.S. racing program to design and distribute training equipment. Under the terms of the contract, Race Cars will deliver the training equipment on August 1, 2022. The customer will pay $300,000 to Race Cars, Inc. on May 15, 2021. Interest incurred on similar financing agreements in the industry is $35,000. What is the transaction price Which should Race Cars, Inc. recognize: interest expense or interest income for this transaction?ABC Franchisor entered into a franchise contract that will allow the franchisee to use ABC's copyright over a video. The contract is applicable for a period of 5 years. The transaction price is P100,00 cash to be paid on the date of grant. What is the journal entry to recognize the transaction price? [A] DR: Cash 100,000; CR: Franchise Revenue [B] DR: Cash - 100,000; CR: Contract Liability [C] DR: Contract Asset – 100,000; CR: Franchise Revenue [D] DR: Contract Asset – 100,000; CR: Contract LiabilityCollins, Inc., entered into a 10-year franchise agreement with an individual. For an initial franchise fee of$40,000, Collins agrees to assist in design and construction of the franchise location and in all other necessarystart-up activities. Also, in exchange for advertising and promotional services, the franchisee agrees to pay continuing franchise fees equal to 5% of revenue generated by the franchise. When should Collins recognize revenuefor the initial and continuing franchise fees?
