In: Accounting
Entity A is operated as an internet cafe, which locates in Hung Hom. It opens 24/7 (24 hours a day and 7 days a week). Recently, it enters into a short-term contract with Entity B, the largest local internet game server-workstation service provider on 1 January 2019. The contract period is 4 months from 1 February 2019 to 31 May 2019. On 31 January 2019, the internet game server and the workstations are delivered to Entity A.
This contract includes the provision of one electronic game server with ten workstations and a 24/7 technical supporting service to Entity A over the contract period. According to the contract terms, Entity A is not required to return the game server and the ten workstations back to Entity B at the contract end. Entity A pays a monthly fixed fee of $68,800 to Entity B at every month-end.
Entity B sells the same internet game server with ten workstations to other customers alone for $360,000. The original cost of them is $235,000. In addition, it also provides the same 24/7 technical supporting service to other customers alone for $10,000 per month.
REQUIRED:
Prepare journal entries of the seller on 1 January 2019, 31 January 2019, 1 February 2019, 28 February 2019, 1 March 2019, 31 March 2019, 1 April 2019, 30 April 2019, 1 May 2019 and 31 May 2019 in accordance with the relevant accounting standards.
ACCOUNT NAMES FOR INPUT:
| Revenue (Server-workstations) | Cost of sales (Server-workstations) | Inventory (Server-workstations) |
| Revenue (Technical support) | Cost of sales (Technical support) | Inventory (Technical support) |
| Contract asset (Server-workstations) | Contract liability (Server-workstations) |
| Contract asset (Technical support) | Contract liability (Technical support) |
| Payable | Receivable | Bank | Interest expense | Interest revenue | No entry |
ANSWERS:
Journal Entries:
Date | Account Name | Debit ($) | Credit ($) | Hints For Sequence |
1-Jan-19 | Blank 1 | Blank 2 | ||
Blank 3 | Blank 4 | |||
31-Jan-19 | Blank 5 | Blank 6 | ||
Blank 7 | Blank 8 | Judge Dr/Cr side | ||
Blank 9 | Blank 10 | Judge Dr/Cr side | ||
Blank 11 | Blank 12 | Judge Dr/Cr side | ||
1-Feb-19 | Blank 13 | Blank 14 | ||
Blank 15 | Blank 16 | An asset. Judge Dr/Cr side | ||
Blank 17 | Blank 18 | Judge Dr/Cr side | ||
28-Feb-19 | Blank 19 | Blank 20 | ||
Blank 21 | Blank 22 | Judge Dr/Cr side | ||
28-Feb-19 | Blank 23 | Blank 24 | A liability. Judge Dr/Cr side | |
Blank 25 | Blank 26 | Judge Dr/Cr side | ||
1-Mar-19 | Blank 27 | Blank 28 | ||
Blank 29 | Blank 30 | An asset. Judge Dr/Cr side | ||
Blank 31 | Blank 32 | Judge Dr/Cr side | ||
31-Mar-19 | Blank 33 | Blank 34 | ||
Blank 35 | Blank 36 | Judge Dr/Cr side | ||
31-Mar-19 | Blank 37 | Blank 38 | A liability. Judge Dr/Cr side | |
Blank 39 | Blank 40 | Judge Dr/Cr side | ||
1-Apr-19 | Blank 41 | Blank 42 | ||
Blank 43 | Blank 44 | An asset. Judge Dr/Cr side | ||
Blank 45 | Blank 46 | Judge Dr/Cr side | ||
30-Apr-19 | Blank 47 | Blank 48 | ||
Blank 49 | Blank 50 | Judge Dr/Cr side | ||
30-Apr-19 | Blank 51 | Blank 52 | A liability. Judge Dr/Cr side | |
Blank 53 | Blank 54 | Judge Dr/Cr side | ||
1-May-19 | Blank 55 | Blank 56 | ||
Blank 57 | Blank 58 | An asset. Judge Dr/Cr side | ||
Blank 59 | Blank 60 | Judge Dr/Cr side | ||
31-May-19 | Blank 61 | Blank 62 | ||
Blank 63 | Blank 64 | Judge Dr/Cr side | ||
31-May-19 | Blank 65 | Blank 66 | A liability. Judge Dr/Cr side | |
Blank 67 | Blank 68 | Judge Dr/Cr side |
Date | Account Name | Debit ($) | Credit ($) |
31-Jan-19 | Receivable A/c Dr | $ 235,200.00 | |
To Contract liability (Server-workstations) A/c | $ 235,200.00 | ||
31-Jan-19 | Cost of sales (Server-workstations) A/c Dr | $ 235,000.00 | |
Inventory (Server-workstations) A/c | $ 235,000.00 | ||
01-Feb-19 | Receivable A/c Dr | $ 10,000.00 | |
To Contract liability (Technical support) A/c | $ 10,000.00 | ||
01-Feb-19 | Receivable A/c Dr | $ 58,800.00 | |
Contract liability (Server-workstations) A/c | $ 58,800.00 | ||
28-Feb-19 | Contract liability (Technical support) A/c Dr | $ 10,000.00 | |
To Revenue (Technical support) A/c | $ 10,000.00 | ||
28-Feb-19 | Contract liability (Server-workstations) A/c Dr | $ 58,800.00 | |
To Revenue (Server-workstations) A/c | $ 58,800.00 | ||
28-Feb-19 | Bank A/c Dr | $ 68,800.00 | |
To Receivable A/c | $ 68,800.00 | ||
01-Mar-19 | Receivable A/c Dr | $ 10,000.00 | |
To Contract liability (Technical support) A/c | $ 10,000.00 | ||
01-Mar-19 | Receivable A/c Dr | $ 58,800.00 | |
Contract liability (Server-workstations) A/c | $ 58,800.00 | ||
31-Mar-19 | Contract liability (Technical support) A/c Dr | $ 10,000.00 | |
To Revenue (Technical support) A/c | $ 10,000.00 | ||
31-Mar-19 | Contract liability (Server-workstations) A/c Dr | $ 58,800.00 | |
To Revenue (Server-workstations) A/c | $ 58,800.00 | ||
31-Mar-19 | Bank A/c Dr | $ 68,800.00 | |
To Receivable A/c | $ 68,800.00 | ||
01-Apr-19 | Receivable A/c Dr | $ 10,000.00 | |
To Contract liability (Technical support) A/c | $ 10,000.00 | ||
01-Apr-19 | Receivable A/c Dr | $ 58,800.00 | |
Contract liability (Server-workstations) A/c | $ 58,800.00 | ||
30-Apr-19 | Contract liability (Technical support) A/c Dr | $ 10,000.00 | |
To Revenue (Technical support) A/c | $ 10,000.00 | ||
30-Apr-19 | Contract liability (Server-workstations) A/c Dr | $ 58,800.00 | |
To Revenue (Server-workstations) A/c | $ 58,800.00 | ||
30-Apr-19 | Bank A/c Dr | $ 68,800.00 | |
To Receivable A/c | $ 68,800.00 | ||
01-May-19 | Receivable A/c A/c Dr | $ 10,000.00 | |
To Contract liability (Technical support) A/c | $ 10,000.00 | ||
01-May-19 | Receivable A/c Dr | $ 58,800.00 | |
Contract liability (Server-workstations) A/c | $ 58,800.00 | ||
31-May-19 | Contract liability (Technical support) A/c Dr | $ 10,000.00 | |
To Revenue (Technical support) A/c | $ 10,000.00 | ||
31-May-19 | Contract liability (Server-workstations) A/c Dr | $ 58,800.00 | |
To Revenue (Server-workstations) A/c | $ 58,800.00 | ||
31-May-19 | Bank A/c Dr | $ 68,800.00 | |
To Receivable A/c | $ 68,800.00 | ||