1.

Revenue Recognition
Lavender Ltd. provides a bundled service offering to Customer A. It charges Customer A $50 000 for an initial subscription
to its service and three other ongoing services — Customer service for 1 year, platform fee, and ad free fee for that year.
Customer A pays the $ 50,000 upfront, on 1 July 2020. Lavender Ltd. determines that, if it were to charge a separate fee
for each
service if sold separately, it would sum up to:

Assume that Lavender Ltd.’s reporting period is June – July

Required: Prepare the appropriate journal to record the transaction!

2. Lease
S. Holmes agreed to lease its machine to Watson Ltd.:
 The lease term is 4 years with no renewal option. The equipment’s economic life is 10 years.
 The equipment cost $600,000 and its fair value on 1 jan 2019 is $900,000.
 At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000.
Thomas estimates that the expected residual value at the end of the lease term will be $50,000.
 The lease agreement requires equal annual rental payments, beginning on 31st Dec 2019.
 the implicit rate of the lease is
7% Required:

 Calculate the annual rental payment required, then prepare lease amortization schedules for both lessor and lessee.
 Prepare the journal entries required by both the lessor and the lessee in 2019 and 2023.

3. Income tax
Thistle Ltd made an accounting profit before tax of $100,000 for the year ended 31st Dec 2018, included in it:
- $4000 Research expenses, where 135% tax deduction is allowed
- $5500 worth of sales made on account.
- Two years ago, an equipment was purchased for $50,000 with a useful life of 10 years (no. res value). According
to the taxation policy the equipment should be depreciated by 12%
- The company made an payment in advance to cover rent for 18 months on November 3rd 2018
- The company made a provision for its annual sick leave amounting to $5000, included in the accounting profit is
$1000 of annual sick leave expense. During the period only $3000 of the sick leave was paid.

Required:

- Prepare a current tax worksheet for Thistle Ltd. for the year ended 31st Dec 2018 and a journal entry to
recognize current tax payable.
- Prepare a deferred tax worksheet for Thistle Ltd for the year ended 31st Dec 2018 and a journal entry to
recognize deferred tax movements.
4. Share-based payment
Brierley Ltd grants 100 options to each of its 50 employees, conditional upon the employee staying with the company
for the next 3 years. The company estimates the fair value of the options at the end of each year as shown below. All
options held by employees remaining at the end of year 3 will vest

A. During year 1, three employees leave and the company estimates that six more will leave during years 2 and 3.
B. Four employees leave during year 2, and the company estimates that three more will leave during year 3.
C. Two employees leave during year 3.
D. At the end of year 3, 15 employees have exercised their option.
E. Another 14 employees exercise their options at the end of year 4.
F. The remaining 12 employees exercise their options at the end of year 5.

5. Employee benefits
Sunshine Ltd. has a defined benefit pension plan for its employees.

Int rate: 5%
Required: Prepare the pension plan worksheet and the journal entry to summarise the defined benefit pension plan for
the year ended 31 December 2020 for Sunshine. Show your workings.