MAGBATO, ELLA MAE R.

MODULE 4

Problem 1

Maritime Ship Manufacturers

Step 1:Maritime Ship Manufacturers signs a contract to sell cargo ships to Kim and Dreicy Shipping Lines.

Step 2: The performance obligation is to sell cargo ships.

Step 3: The transaction price is 720,000,000.

Step 4: Since there is only 1 performance obligation, the price is 720,000,000.

Step 5: Maritime Ship Manufacture will recognize a revenue of 720,000,000 when they deliver the cargo
ships to Kim and Dreicy Shipping Lines.

Problem III

Anton Video Tech

1. Prepare the Journal entries on December 20, 20x6

No journal entry

2. Prepare the Journal entries on January 1, 20x7

Accounts Receivable P1520,000

Sales P1520,000

3. Prepare the Journal entries on January 25, 20x7

Cash P1520,000

Accounts Receivable P1520,000

4. Determine the amount of revenue from sales on December 20,20x6

None

5. Determine the amount of revenue from sales on January 1,20x7

Revenue P1520,000

6. Determine the amount of revenue from sales on January 25,20x7

None
Problem VIII

Epsi Outsourcing

1. How should the P48,000 and P72,000 be recognized?

The 48,000 is commission costs, and the 72,000 is designing costs. These should be capitalized.

2. What is the treatment of migration and testing costs- capitalized as an asset or expensed?

Migration and testing costs is expensed.

Problem IX, page 997

JJ Company

1. Prepare the journal entries on January 01, 20x7.

No journal entries

2. Prepare the journal entries on February 01, 20x7.

Contract Asset 72,000

Sales 72,000

3. Prepare the journal entries on March 01, 20x7.

Accounts Receivable 240,000

Contract Asset 72,000

Sales 168,000
Problem X, page 997

AA Company

1. Prepare the journal entries on March 01, 20x7.

No entry

2. Prepare the journal entries on April 15, 20x7.

Cash 24,000

Contract Liability 24,000

2. Prepare the journal entries to record the sale and cost of goods sold on July 31, 20x7.

Contract Liability 24,000

Cost of goods sold 18,000

Sales 24,000

Inventory 18,000

Problem XIV, page 998

Ging Systems

1. Indicate the transaction price for each of these transactions and when revenue will be recognized.

Software- 56,000

Technical support- 24,000

2. Prepare Ging’s Journal entry to record the sale of software.

Cash 80,000

Sales 56,000

Unearned Revenue 24,000

Problem XVII, page 999

Aljon Co.

How much revenue should Aljon record for the merchandise sold to Ana?

Sales price 60,000

excess in FV (2,500)

Sales, adj 57,500

Problem XVIII, page 999

Anton’s Agency

1. Determine the transaction price of the arrangement for Anton, assuming 100 policies are sold.

Sale of policies 20,000

Unearned Revenue 9,000

Transaction Price 29,000

2. Prepare the journal entries, assuming that the 100 policies are sold in January 20x5 and that Anton
receives commissions from Capital.

Cash 20,000

Accounts Receivable 9,000

Sales 20,000

Deferred Revenue 9,000

Problem XX, page 999 – 1000

Fermin Computers

1. How many performance obligations are in this contract?

There are 2 performance obligations: to deliver 100 units of desktop computers and to provide a
placement shipment at no additional cost if items are lost in transit

2. Prepare the journal entry Gold Examiner would record on March 1.

Cash 1,470,000

Unearned Revenue (Computers) 1,411,200

Unearned Revenue (Insurance) 58,800

3. Prepare the journal entry Gold Examiner would record on March 30.

Unearned Revenue (Computers) 1,411,200

Sales 1,411,200

4. Prepare the journal entry Gold Examiner would record on April 1.

Unearned Revenue (Insurance) 58,800

Revenue 58,800
Problem XXIII, page 1001

Tucson Financial Services

1. Prepare the journal entries for Tucson in 20x5 and 20x6 related to this service contract.

20x5

Jan Cash 20,000

Unearned Revenue 20,000

Dec Unearned Revenue 20,000

Revenue 20,000

20x6

Jan Cash 20,000

Unearned Revenue 20,000

Dec Unearned Revenue 20,000

Revenue 20,000

2. Prepare the journal entries for Tucson in 20x7 related to the modified service contract, assuming
prospective approach.

Jan Cash 56,000

Unearned Revenue 56,000

Dec Unearned Revenue 14,000

Revenue 14,000

3. Repeat the requirements for No.2, assuming Tucson and Wigo agree on a revised set of services in the
extended contract period and the modification results in a separate performance obligation.

Jan Cash 56,000

Unearned Revenue 56,000

Dec Unearned Revenue 16,000

Revenue 16,000
Problem XXIV, page 1001

Giordano Corp

1. Prepare the journal entries for Giordano for the sale of the first 90 stations.

Cash 18,000

Sales 18,000

Cost of Goods Sold 9,720

Inventory 9,720

2. Prepare the journal entry for the sale of 10 more stations

Cash 2,000

Sales 2,000

Cost of Goods Sold 1,080

Inventory 1,080

3. Prepare the journal entry for the sale of 10 more stations

Cash 1,900

Discount 100

Sales 2,000

Cost of Goods Sold 1,080

Inventory 1,080
Problem XXVI, page 1001 – 1002

Espenilla Associates

ADJUSTED MARKET ASSESSMENT APPROACH

other vendors 1,100

market adjusted rate 10%__

SA Selling price 1,210

Problem XXVII, page 1002

Espenilla Associates

ESTIMATED COST PLUS MARGIN APPROACH

Cost of service 600

Cost+Mark up on cost 130%

SA Selling price 780

Problem XXVIII, page 1002

Espenilla Associates

RESIDUAL APPROACH

Selling price of clubs with fitting services 15,000

selling price without fitting services 14,000

Residual 1,000
Problem XXXII, page 1002 – 1003

CPF Company

1. Journal Entry at January 2, 20x5

Accounts Receivable 3,000,000

Sales 2,400,000

Refund Liability 600,000

Cost of Goods Sold 1,280,000

Estimated Inventory Return 320,000

Inventory 1,600,000

2. Assume that one customer returns the seeds on March 1, 20x5, due to unsatisfactory performance.
Prepare the journal entry to this transaction

Refund Liability 200,000

Accounts Payable 200,000

Inventory 106,667

Estimated Inventory Return 106,667

2. Briefly describe the accounting for these sales if CPF is unable to reliably estimate returns.

CPF Company should wait for the period of unconditional right to return of his products to expire to
recognize their revenues.

Problem XXXV, page 1003

GG Company

1. Prepare the journal entries to record the sale

Accounts Receivable 1,080,000

Sales 1,080,000

2. Prepare the journal entry to record the related cost of goods sold.

Cost of goods sold 672,000

Inventory 672,000
Problem XXXVI, page 1003

Lozada.com

HOW MUCH REVENUE WILL LOZADA RECOGNIZE FOR THE SALE OF ONE MAXBOOK PRO?

Ronnie Lozada should only recognize the P1,500 commission as his revenue and remit the remainder to
Chicken Computers as their collection agent.

Problem XXXVIII, page 1004

JJ Company

1. journal entries to record the revenue and liabilities related to the warranties.

Cash 14,400,000

Warranty Expense 72,000

Sales 14,400,000

Warranty Liability 72,000

Cash 28,800

Unearned Revenue – Warranty Sold 28,800

2. journal entries to reduce inventory and recognize cost of goods sold

Cost of Sales 9,600,000

Inventory 9,600,000

Problem XXXIX, page 1004

Conrading system

HOW MANY PERFORMANCE OBLIGATIONS EXISTS IN THIS CONTRACT

There are 2 performance obligations: the sale of subscription to an Anti-virus Software and the option
that gives a material right of paying for the software for only half the price on next purchase.
Problem XLIII, page 1005

Zayn Inc

1. journal entries on march 1, 20x5

Cash 400,000

Liability to Wade Company 400,000

2. journal entry to repurchase the ingots on May 1, 20x5

Interest Expense 8,000

Liability to Wade Company 8,000

Liability to Wade Company 408,000

Cash 408,000

Problem XLIV, page 1005

MM Inc.

1. Prepare the journal entry on January 1, 20x7

Cash 240,000

Liability to RR Company 240,000

2. Prepare the journal entry on December 31, 20x8

Interest Expense 24,000

Liability to RR Company 24,000

3. Prepare the journal entry on December 31, 20x9

Interest Expense 26,400

Liability to RR Company 26,400

Liability to RR Company 290,400

Cash 290,400