(20 minutes)IBM Corp. is a public company that manufactures and sells computer equipment andprovides support services. IBM's customers can purchase computer equipment or supportservices separately, but the company also offers computer equipment that includessupport as a package.On October 1, 2020, Next Web Ltd. enters into a contract to purchase a computerequipment and support package from IBM. The contract is for $100 million and includesthe computer equipment and 10 years of support services once the computer equipmentis delivered.The computer equipment that was purchased by Next Web would normally sell for $95 Cmillion and 10 years of support services would be valued at $15 million if purchasedseparately. IBM's management expects the computer equipment to be delivered byOctober 1, 2021. The support is expected to be provided evenly for 10 years afterdelivery of the computer equipment.The contract requires Next Web to make a $15-million payment to IBM within 30 dayssigning the contract and then $35 million on October 1, 2021, with the balance to be paannually over 10 years once the computer equipment is delivered on October 1, 2021.Next Web has secured financing to pay for the computer equipment and so IBM'smanagement has no concerns related to collectability.Required1. Assuming that IBM provides the goods and services as and when expected under thcontract and Next Web makes its payments as required, determine when and howmuch revenue IBM would be able to recognize as part of the contract. Use the modefor revenue recognition introduced in class and the textbook in preparing yourresponse. Round percentages to the nearest two decimal places.2. Based on your analysis in part "1" prepare the required journal entries on October 1,2020, October 31, 2020 and October 1, 2021.EditViewInsertFormat ToolsTable| в I U12pt vParagraph v

1) Question Analysis Step 1: Is there a contract? Yes, each party has an agreement to enter a…

IBM Corp. is a public company that manufactures and sells computer equipmen provides support services. IBM's customers can purchase computer equipment services separately, but the company also offers computer equipment that inclu- support as a package. On October 1, 2020, Next Web Ltd. enters into a contract to purchase a compu equipment and support package from IBM. The contract is for $100 million and the computer equipment and 10 years of support services once the computer ed is delivered.

IBM Corp. is a public company that manufactures and sells computer equipmen provides support services. IBM's customers can purchase computer equipment services separately, but the company also offers computer equipment that inclu- support as a package. On October 1, 2020, Next Web Ltd. enters into a contract to purchase a compu equipment and support package from IBM. The contract is for $100 million and the computer equipment and 10 years of support services once the computer ed is delivered.

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 7C: On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial...

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JustKitchens Inc. provides services to restaurants and hotels. The company supplies paper products, tableware, cookware, restaurant and kitchen equipment, and cleaning supplies. On January 2, 2019, Just-Kitchens enters into a contract with a local restaurant chain to provide its services for 3 years at a cost of 10,000 per year. The restaurant chain pays the total contract fee on January 2, 2019. JustKitchenss stand-alone selling price is also 10,000 per year. After 2 years, the restaurant asks to modify the contract. On January 2, 2021, the companies agree to reduce the fee for the third year to 9,000 in exchange for extending the contract for 2 additional years at a fee of 11,000 per year. This modification is agreed to by both parties, and on that date the restaurant chain pays for the additional 2 years of service. The 11,000 fee for the additional years is the same as JustKitchenss stand-alone price. Required: 1. How should JustKitchens account for the contract modification? 2. Prepare the journal entry that JustKitchens would make over the life of the contract.
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
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For more than a decade since its incorporation, Asahi Company had been renting its office space. The Company President thought of constructing their own building for P40,000,000 which they plan to start and finish until December 31, 2021. Asahi made the following payments, based on the construction contract, during 2021.· January 31- P5,000,000· February 28- P8,000,000· July 1- P15,000,000· August 31- P10,000,000· November 30- P2,000,000Asahi secured a 10%, 4-year noted dated January 1, 2021, specifically intended for the construction. The amount was P20,000,000.Also, the entity had other debts outstanding as follows:· 8%, 6-year note dated December 31, 2019- P18,000,000· 12%, 7-year noted dated December 31, 2018 - P22,000,000 What is the total cost of the building constructed?
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Infotech Bhd enters a contract on 1 January 2019 to produce software for a customer for RM5,000,000. Infotech Bhd receives RM2,000,000 from the customer upon contract signing and the balance at the completion of the contract. According to the contract, the customer controls the system during the creation of the program. Infotech Bhd estimates that it will take two years to complete the project and uses the number of labor hours to estimate the rate of completion. Macro Tech spends 30,000 hours in the first year of the contract and another 20,000 hours the second year. Required: Prepare the entries recorded by Macro Tech over the life of this contract. Assume that all payments are complete by the end of 2020.
On June 1, 2020, Vaughn Company sells $193,000 of shelving units to a local retailer, ShopBarb, which is planning to expand its stores in the area. Under the agreement, ShopBarb asks Vaughn to retain the shelving units at its factory until the new stores are ready for installation. Title passes to ShopBarb at the time the agreement is signed. The shelving units are delivered to the stores on September 1, 2020, and ShopBarb pays in full. Prepare the journal entries
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