LG Company is a manufacturer fully loaded washing machines. LG promised to deliver 1 dozen of fully loaded washing machines to a newly opened Laundry Shop for a total price of P600,000. The contract contains a clause for free repairs and maintenance for 2 years from date of delivery. The fully loaded washing machines were delivered on Oct. 1, 2019 3. How much revenue from sales of washing machine will LG Company recognize? C. a. P600,000 b. Р300,000 P150,000 d. No sales revenue to be recognized

LG Company is a manufacturer fully loaded washing machines. LG promised to deliver 1 dozen of fully loaded washing machines to a newly opened Laundry Shop for a total price of P600,000. The contract contains a clause for free repairs and maintenance for 2 years from date of delivery. The fully loaded washing machines were delivered on Oct. 1, 2019 3. How much revenue from sales of washing machine will LG Company recognize? C. a. P600,000 b. Р300,000 P150,000 d. No sales revenue to be recognized

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 6MC

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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.
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