Principles Of Auditing & Other Assurance Services
Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 14, Problem 42P
To determine

Suggest audit procedures for the audit liability and related audit royalty expenses for the year.

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Your client, Software and Stuff ( Software), has developed a new electronic game. One part of the game uses software developed by another company, Component of Yuma (Component). Software signed an agreement with Component that provides that Software will pay Component a royalty of $1.00 per game sold. At yer-end you note that a material liability is payable by Software to Component under the terms of the royalty agreement. Provide a list of procedures that should be performed on the royalty liability and the related royalty expense for the year.
On January 1, 20x1, Pongcuter Co. enters into a contract with a customer to grant a software licensefor ₱1,000,000. The fee is payable at contract inception. The license has a term of four years, toreckon from the date the customer can use the software. The customer can determine how andwhen to use the right without further performance by Pongcuter Co. and does not expect thatPongcuter Co. will undertake any activities that significantly affect the intellectual property towhich the customer has rights. The software is transferred to the customer on February 1, 20x1.However, the code, which is necessary for the customer to use the software, is transferred only onApril 1, 20x1. How should Pongcuter Co. recognize revenue from the fixed consideration in thecontract?a. in full on February 1, 20x1b. in full on April 1, 20x1c. deferred and amortized over four years starting on February 1, 20x1d. deferred and amortized over four years starting on April 1, 20x1
Genius Ltd is a computers and software developer that enters into a contract with a customer to sell 12 computers for £600 each. In the contract the customer has required Genius Ltd to transfer the specific software license, perform the installation, and provide a software update and technical support for a two-year period for a price of £20,000. The company usually sells the software license, the installation service, the software update and the technical support separately to customers at the respective prices of £8,000, £4,000, £4,000 and £4,000. The customer requires a specific installation service that includes some specific functions to enable the software to interface with other customized software application. After the delivery of the first 6 computers, the contract is modified and the customer required the delivery of an additional 8 computers (for a total of 20 computers). The price of the additional computer is £490 which is the stand alone price of the additional products.…
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