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
[Link]
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
