T: | Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE | | Asset for product to be returned | Commission expense | Commission revenue | Revenue | | Cost of sales | Contract asset | Contract liability | Retained earnings | No entry | ANSWER: Journal Entries: Date Account Name Debit ($) Credit ($) Hints For Sequence 1-Jan-20 - - 31-Dec-20 - - 31-Dec-20 - - - - 1-Jan-21 - - 31-Jan-21 - - 28-Feb-21 - - - - 31-Mar-21 - - - - 30-Apr-21 -
Entity A is a Hong Kong-based limited company that participates in the building material industry for many years. It sells high-quality raw materials to different local and foreign manufacturers. Entity B is one of its loyal customers for more than 30 years.
On 1 January 2020, Entity A received an advanced payment of $3,600,000 from Entity B through the Hong Kong City Bank for selling Material X. According to the contract terms, Entity A would only deliver Material X to Entity B on 31 December 2020. The regular cash-selling price of Material X was $3,600,000. The cost of sales of Material X was $2,563,000.
On 1 January 2021, Entity A entered into another contract with Entity B. This contract stated that Entity A was required to transfer Material Y and Material Z to Entity B in exchange for $681,500. According to the contract terms, Entity A could invoice this full amount on 31 January 2021. Material Y was to be delivered on 28 February 2021 and Material Z was to be delivered on 31 March 2021. Both promises to transfer Material Y and Material Z were identified as separate performance obligations. The amount of $256,000 was allocated to Material Y and $425,500 to Material Z. The cost of sales of Material Y and Material Z were 70% and 80% of their selling prices respectively. Entity A received a crossed cheque from Entity B of Material Y and Material Z on 30 April 2021.
The market interest rate for the year 2020 and 2021 were 5.5% and 6.5% respectively. Entity A adopts a perpetual inventory system for keeping its inventory accounting records. Entity A recognises revenue when control of each material transfers to Entity B.
REQUIRED:
Provide
ACCOUNTS FOR INPUT:
| Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE |
| Asset for product to be returned | Commission expense | Commission revenue | Revenue |
| Cost of sales | Contract asset | Contract liability |
ANSWER:
Journal Entries:
| Date | Account Name | Debit ($) | Credit ($) | Hints For Sequence |
| 1-Jan-20 | - | |||
| - | ||||
| 31-Dec-20 | - | |||
| - | ||||
| 31-Dec-20 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 1-Jan-21 | - | |||
| - | ||||
| 31-Jan-21 | - | |||
| - | ||||
| 28-Feb-21 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 31-Mar-21 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 30-Apr-21 | - | |||
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