On 1 February 2022, Speedy Ltd entered into an agreement with Osaka Ltd to develop a new client database system for Osaka Ltd. The agreement states that the total consideration to be paid for the system will be $380,000. Speedy Ltd expects that its total costs for the system will be $200,000. By the end of its reporting period, 30 June 2022, Speedy Ltd had paid for labour costs of $40,000 and materials costs of $100,000. Of the materials costs, $30,000 is in respect of materials that have not yet been used on the project for Osaka Ltd. Of the labour costs, $10,000 is an advance payment to a subcontractor who had not performed their work on the project as at 30 June 2022. As at 30 June 2022, Osaka Ltd had made progress payments to Speedy Ltd of $250,000. Speedy Ltd calculates the measurement of progress using input methods in accordance with paragraph B18 of AASB 15/IFRS 15. Required: (a) Calculate the amount of revenue to be recognised by Speedy Ltd for the year ended 30 June 2022. Please show all workings. ( (b) Prepare all necessary journal entries to record the above for Speedy Ltd. Assume that Speedy Ltd can sustain an argument that the costs incurred in respect of services yet to be delivered could be deferred until those services are delivered. Narrations are not required for journal entries. *
On 1 February 2022, Speedy Ltd entered into an agreement with Osaka Ltd to develop a new client database system for Osaka Ltd. The agreement states that the total consideration to be paid for the system will be $380,000. Speedy Ltd expects that its total costs for the system will be $200,000. By the end of its reporting period, 30 June 2022, Speedy Ltd had paid for labour costs of $40,000 and materials costs of $100,000. Of the materials costs, $30,000 is in respect of materials that have not yet been used on the project for Osaka Ltd. Of the labour costs, $10,000 is an advance payment to a subcontractor who had not performed their work on the project as at 30 June 2022. As at 30 June 2022, Osaka Ltd had made progress payments to Speedy Ltd of $250,000. Speedy Ltd calculates the measurement of progress using input methods in accordance with paragraph B18 of AASB 15/IFRS 15. Required: (a) Calculate the amount of revenue to be recognised by Speedy Ltd for the year ended 30 June 2022. Please show all workings. ( (b) Prepare all necessary journal entries to record the above for Speedy Ltd. Assume that Speedy Ltd can sustain an argument that the costs incurred in respect of services yet to be delivered could be deferred until those services are delivered. Narrations are not required for journal entries. *
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 19RE
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Transcribed Image Text:On 1 February 2022, Speedy Ltd entered into an agreement with Osaka Ltd to
develop a new client database system for Osaka Ltd. The agreement states that
the total consideration to be paid for the system will be $380,000. Speedy Ltd
expects that its total costs for the system will be $200,000. By the end of its
reporting period, 30 June 2022, Speedy Ltd had paid for labour costs of
$40,000 and materials costs of $100,000. Of the materials costs, $30,000 is in
respect of materials that have not yet been used on the project for Osaka Ltd.
Of the labour costs, $10,000 is an advance payment to a subcontractor who
had not performed their work on the project as at 30 June 2022. As at 30 June
2022, Osaka Ltd had made progress payments to Speedy Ltd of $250,000.
Speedy Ltd calculates the measurement of progress using input methods in
accordance with paragraph B18 of AASB 15/IFRS 15.
Required:
(a) Calculate the amount of revenue to be recognised by Speedy Ltd for the
year ended 30 June 2022. Please show all workings. (
(b) Prepare all necessary journal entries to record the above for Speedy Ltd.
Assume that Speedy Ltd can sustain an argument that the costs incurred in
respect of services yet to be delivered could be deferred until those services are
delivered. Narrations are not required for journal entries.
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