T: | Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE | | Asset for product to be returned | Commission expense | Commission revenue | Revenue | | Cost of sales | Contract asset | Contract liability | Retained earnings | No entry | ANSWER: Journal Entries: Date Account Name Debit ($) Credit ($) Hints For Sequence 1-Jan-20       -         -  31-Dec-20       -         -  31-Dec-20       -         -         -         - 1-Jan-21       -         -  31-Jan-21       -         - 28-Feb-21       -         -         -         - 31-Mar-21       -         -         -         - 30-Apr-21       -

Entity A is a Hong Kong-based limited company that participates in the building material industry for many years.  It sells high-quality raw materials to different local and foreign manufacturers.  Entity B is one of its loyal customers for more than 30 years.

On 1 January 2020, Entity A received an advanced payment of $3,600,000 from Entity B through the Hong Kong City Bank for selling Material X.  According to the contract terms, Entity A would only deliver Material X to Entity B on 31 December 2020.  The regular cash-selling price of Material X was $3,600,000.  The cost of sales of Material X was $2,563,000.

On 1 January 2021, Entity A entered into another contract with Entity B.  This contract stated that Entity A was required to transfer Material Y and Material Z to Entity B in exchange for $681,500.  According to the contract terms, Entity A could invoice this full amount on 31 January 2021.  Material Y was to be delivered on 28 February 2021 and Material Z was to be delivered on 31 March 2021.  Both promises to transfer Material Y and Material Z were identified as separate performance obligations.  The amount of $256,000 was allocated to Material Y and $425,500 to Material Z.  The cost of sales of Material Y and Material Z were 70% and 80% of their selling prices respectively.  Entity A received a crossed cheque from Entity B of Material Y and Material Z on 30 April 2021.

The market interest rate for the year 2020 and 2021 were 5.5% and 6.5% respectively.  Entity A adopts a perpetual inventory system for keeping its inventory accounting records.  Entity A recognises revenue when control of each material transfers to Entity B.

REQUIRED:

Provide journal entries for Entity A from 1 January 2020 to 30 April 2021 under relevant accounting standards.

ACCOUNTS FOR INPUT:

| Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE |

| Asset for product to be returned | Commission expense | Commission revenue | Revenue |

| Cost of sales | Contract asset | Contract liability | Retained earnings | No entry |

ANSWER:

Journal Entries: