i) Prepare the journal entries in the books of the company to record the transaction. ii) Explain why the transaction is recorded in this manner using NZ IFRS 15 requirements.
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A telecommunications company enters into a contract with a customer. Under the contract, the company promises to provide to the customer 4 GB data, 300 minutes of talk time, and 500 texts for $36.
Required:
A) A company sells mobile phone sets for $99 each. The company’s cost of each phone set is $70. The phone set became very popular with its customers. Near
the end of the financial year, 5000 customers purchased the phone set from the company. The company allows its customers to return the phone set within 14
days if they have not unpacked the set. The return period has not expired for any phone set sold by the end of the year. The company expects, based on its
past experience, that 1% of its customers will return the phone set.
Required:
i) Prepare the
ii) Explain why the transaction is recorded in this manner using NZ IFRS 15 requirements.
Answer all the subparts A,i and ii.if answered within 30mins,it would be appreciable
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- Washamoto Ltd took delivery of a microcomputer and printer on 1 July 20X6, the beginning of its financial year. The list price of the equipment was sh4,999 but Washamoto Ltd was able to negotiate a price of sh4,000 with the supplier. However, the supplier charged an additional sh340 to install and test the equipment. The supplier offered a 5% discount if Washamoto Ltd paid for the equipment and the additional installation costs within seven days. Washamoto Ltd was able to take advantage of this additional discount. The installation of special electrical wiring for the computer cost sh110. After initial testing certain modifications costing sh199 proved necessary. Staff were sent on special training courses to operate the microcomputer and this cost sh 990. Washamoto Ltd insured the machine against fire and theft at a cost of sh 49 per annum. A maintenance agreement was entered into with Sonoma plc. Under this agreement Sonoma plc. Promised to provide 24 hour breakdown cover for one…A telecommunications company enters into a contract with a customer. Under the contract, the company promises to provide to the customer 4 GB data, 300 minutes of talk time, and 500 texts for $36. Required: Briefly explain how the telecommunications company should account for the contract under NZ IFRS 15. You need to refer to the relevant requirements but not to any specific paragraph of NZ IFRS 15. b) A company sells mobile phone sets for $99 each. The company’s cost of each phone set is $70. The phone set became very popular with its customers. Near the end of the financial year, 5000 customers purchased the phone set from the company. The company allows its customers to return the phone set within 14 days if they have not unpacked the set. The return period has not expired for any phone set sold by the end of the year. The company expects, based on its past experience, that 1% of its customers will return the phone set. Required: i) Prepare the journal entries in the books of the…A consulting firm enters into a contract to help a small family owned business design a marketing strategy to compete with other companies in the region. THe contract spans 8 months. Baker's client promises to pay $93,000 at the begining of each month. At the end of the contract, Baker either will give their client a refund of $31,000 or will be entitled to an additonal $31,000 bonus, depending on whether sales at Burger boy at year end have increased to a target level. At the inception of the contract, Baker estimated an 80% chance that it will earn the $31,000 bonus and calculates the contract price based on the expected value of future payments to be received. At the end of the contract, Baker received the additional consideration of $31,000.00 #1. Prepare journal entry to record revenue for the first four month of the contract. #2. Prepare the journal entry that "Baker would record after 8 months to record the receipt of the $31,000 bonus. For #1 I'm not sure if I use…
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- Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketing strategy to compete with Burger King. The contract spans eight months. Burger Boy promises to pay $57,000 at the end of each month. At the end of the contract, Velocity either will give Burger Boy a refund of $19,000 or will be entitled to an additional $19,000 bonus, depending on whether sales at Burger Boy at year-end have increased to a target level. At the inception of the contract, Velocity estimates an 80% chance that it will earn the $19,000 bonus and calculates the contract price based on the expected value of future payments to be received. At the start of the fifth month, circumstances change, and Velocity revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Velocity receives the additional consideration of $19,000. Record the entry to record revenue each month for the first four months of the contract…Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketingstrategy to compete with Burger King. The contract spans eight months. Burger Boy promises to pay $60,000at the beginning of each month. At the end of the contract, Velocity either will give Burger Boy a refund of$20,000 or will be entitled to an additional $20,000 bonus, depending on whether sales at Burger Boy at yearend have increased to a target level. At the inception of the contract, Velocity estimates an 80% chance that itwill earn the $20,000 bonus and calculates the contract price based on the expected value of future paymentsto be received. After four months, circumstances change, and Velocity revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Velocity receives the additional consideration of$20,000.Required:1. Prepare the journal entry to record revenue each month for the first four months of the contract.2.…On 1-March-2010, Alpha Pharmaceuticals Ltd. purchased 10 machines for manufacturing tablets. The price of each machine is $150,000. The transportation and installation cost is 1% and 2.5% of the price respectively for each machine. The company also had to bear the cost of test runs for each machine, which were $1,500. The approximate repair and maintenance expense for each machine is $4,000 per year. The company paid 25% of price in cash and signed a 6 month, Notes Payable (N/P) for the remaining balance. The N/P bears interest expense for the company at 5% per annum. Each machine is useful for 5 years and experts estimate that each machine can be sold at the end of its useful life for 10% of its purchase price.During its useful life, the machine will produce 7,500,000 tablets. Following table shows number of tablets produced in each year. Please note that the company’s fiscal year ends on 30th June. year unit produced 1 2,500,000 2 1,700,000 3 1,400,000 4 1,200,000 5…