a. Innotech Apps Berhad entered two contracts on the same date with Advance Cool Corporation. Innotech Apps has provided the following analysis of price and cost for the contracts: Contract price Cost of related goods Gross profit (loss) Helixx Primaxx RM 250,000 RM 275,000 175,000 215,000 65,000 75,000 RM RM Advance Cool, the customer, may cancel both contracts if either of them is not fulfilled by Innotech Apps in a timely manner. Stand-alone prices are typically RM275,000 for the goods in Helixx and RM 300,000 for the goods in Primaxx.

a. Innotech Apps Berhad entered two contracts on the same date with Advance Cool Corporation. Innotech Apps has provided the following analysis of price and cost for the contracts: Contract price Cost of related goods Gross profit (loss) Helixx Primaxx RM 250,000 RM 275,000 175,000 215,000 65,000 75,000 RM RM Advance Cool, the customer, may cancel both contracts if either of them is not fulfilled by Innotech Apps in a timely manner. Stand-alone prices are typically RM275,000 for the goods in Helixx and RM 300,000 for the goods in Primaxx.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 20E: Assume the same facts as in E17-19, except that Rix cannot directly observe the stand-alone selling...

See similar textbooks

Similar questions

What is the transaction price for the following scenario: Scenario A: Tula Inc. sells $20,000 of inventory for $45,000 during the year. Tula estimates returns to be 4% of sales. Scenario B: Universe enters into a contract with a new customer for $12,000. As part of this agreement, Universe agrees to pay $4,000 to the customer to compensate the customer for up-front processing costs. A: $43,200 B: $8,000 A: $43,200 B: $12,000 A: $45,000 B: $8,000 A: $45,000 B: $12,000 None of the above
Leo Consulting enters into a contract with Highgate University to restructure Highgate’s processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $66,000 and earn an additional $13,000 if Highgate achieves $130,000 of cost savings. Leo estimates a 70% chance that Highgate will achieve $130,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract? Transaction price for the contract ?
On June1, S offered to sell a specific generator set to B for P300,000. B sent a letter for acceptance to S on June 8. On June10, however, S became insolvent. On June 12, S received the letter of acceptance. Was the Contract perfected?
Water Co. enters into the following three franchise agreements on July 1, 20x1: Probability of Cash Present Direct Franchisee collection down value of costs payment note Reasonably assured incurred 20,000 60,747 32,000 B Uncertain 20,000 48,037 25,000 C Significantly uncertain 20,000 33,801 21,520 Totals 60,000 142,585 78,520 Additional information: . The down payments are non-refundable and are due at contract inception. The discount rate on all the notes is 12% and the first installment payments are due on July 1, 20x2. At contract inception, Water expects to provide Franchisee B a price concession and concludes that it is probable that Franchisee B will pay half of the note. The adjusted present value of the note is P24,018. The discount rate is 12%. The nature of the licenses is to provide the customers the 'right to use' Water's intellectual property as it exists at grant date. Water transfers the licenses to the customers on July 1, 20x1. How much is the total profit recognized…
Luke consulting enters into a contract with Holand University to restructure Holand's process for purchasing goods from suppliers. The contract states that Luke will earn a fixed fee of P25,000and earn an additional P10,000 if Holand achieves P10,000 of cost savings. Luke determines the transaction price as the expected value of expected consideration, what transsaction price will Luke estimate for this contract?
On 1 January 2020, Entity A sold 100 units of Product X to Entity B for $220 per unit payable on 31 December 2020. On the same date, the cash selling price of one Product X is $200. The customer obtained control of the product at contract inception. However, the contract permits the customer to return the product within 90 days, i.e. on or before 31 March 2020. Product X is a new product. It suffers insufficient testing before the sales to Entity B on 1 January 2020. Thus, Entity A has no relevant historical evidence of product returns or other available market evidence. On 31 March 2020, 15 units of Product X was returned. On 31 December 2020, all outstanding amount was settled. The cost of one Product X is $150. The end or reporting period of Entity A is 31 December. REQUIRED: Provide journal entries for Entity A from 1 January 2020 to 31 December 2020 under relevant accounting standards. ACCOUNTS FOR INPUT: | Bank | Payable | Receivable | Interest expense | Interest revenue |…
(a) On 1 May 20121, Amin Trading Sdn. Bhd. (Amin) has an agreement to deliver 250 units ofcordless vacuum cleaner to Dibea Sdn. Bhd. (Dibea) by 31 August 2021. Based on theagreement, Amin can terminate the agreement any time before 31 August 2021 without havingto pay any compensation to Dibea on non-delivery of the product.Explain whether there is any contract that exists between Amin and Dibea. (b) Jabra Sdn. Bhd. (Jabra) has entered into two contracts with Poco Sdn. Bhd. (Poco). Under thefirst contract, Jabra is to deliver bricks for RM90,000 and the second contract is to build a TNBsub-station for RM40,000 at Poco’s project site.Explain whether the above two contracts should be accounted for as a single contract in thebooks of Jabra.
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, 2022.1. How many performance obligations are there in the contract? 2. Use the same information in Number 5, how much is the revenue to be recognized in 2021? 3. Use the same information in Number 5, how much is the revenue to be recognized in 2022?
or each of the separate revenue contract scenarios 1 through 5, (a) measure the transaction price and (b) determine whether the transaction price is fixed, variable, or some combination of both. 1. Loyola Inc. sells $70,000 of inventory during the year to customers for $140,000. Loyola Inc. accepts returns up to 3 months after the date of purchase. Loyola estimates returns to be 6% of sales. a. Transaction price Answer b. Variable consideration Answer Fixed consideration Answer 2. Nakoma Corp. sells product offering a retroactive volume discount on certain cumulative sales volumes as follows: 0 to 500 units cost $10 each; 501 to 1,000 units cost $9 each; 1,001 units and beyond cost $8 each. For Nakoma’s largest customer, Nakoma estimates the likelihood of cumulative purchases for the year as follows: 15% for 400 units, 50% for 800 units, and 35% for 1,200 units. The revenue contract stipulates that the price per unit of product will be adjusted retroactively once…
One Corporation has two potentialsuppliers. Both are supplying the items atsimilar list prices and trade,discounts.However, Supplier A.offered a credit term of2/10, n/30 and the.other offered a term of3/10, n/40. Which of the following statementsis true? a. Alpha should choose Supplier A and pay on the 10th day.b. Alpha should choose Supplier B and pay on the 10th day.c. Alpha can choose either supplier and always pay on the 10th day.d. If Alpha chose Supplier B, the former should pay on the 30th day so that it can maximize the trade discount
13. Plucky Company recently entered into a contract in which Plucky charges a price of actual cost plus 20%. If the price charged based on this formula is less than the target price of $4,500,000, Plucky is entitled to also receive 50% of the difference between the actual cost and the cost that would lead to the formula price equalling the target price. Plucky incurred an actual cost of $3,600,000. How much will Plucky make from the contract? a) $4,320,000b) $4,395,000c) $4,410,000d) $4,500,000
A company enters into a contract to supply three distinct products to a customer. The promise to supply each of these products is regarded as a separate performance obligation. The stand-alone prices of the three products (if sold singly) are: Product X, $12,500; Product Y, $24,000, Product Z, $27,500 The agreed contract price is $57,600. How should this price be allocated to performance obligations? Product X- $19,200; Product Y- $19,200; Product Z- $19,200 Product X- $11,250; Product Y- $21,600; Product Z- $24,750 Product X- $10,367; Product Y- $21,867; Product Z- $25,366 Product X- $12,500; Product Y- $24,000; Product Z- $27,500