In: Accounting
Electronics Inc. buys and sells photocopy equipment that are
used in businesses across Ontario. The company...
Electronics Inc. buys and sells photocopy equipment that are
used in businesses across Ontario. The company follow IFRS. Unit
selling prices range from $10,000 to $100,000.
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- Electronic Inc. sells a photocopy system to Centennial College
on September 10th, 2020. The selling price for the photocopy
equipment is usually $85,500.
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- Electronic Inc. will also install the photocopy system. The
estimated fair value of installing the photocopy system is
$2,700.
- Electronic Inc. will also provide one year of maintenance
service for the photocopy system. The fair value for the
maintenance for the year is $1,800.
- Electronic Inc. sold the photocopy system with installation and
maintenance to Centennial College for $85,000. The photocopy system
cost Electronic Inc. $45,000.
- Centennial Inc. is obligated to pay Electronic Inc. $20,000
upon delivery of the photocopy system and the balance on November
15th.
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- Electronic Inc. delivers the photocopy equipment on October
15th, 2020, and completes the installation of the photocopy
equipment on November 1st, 2020.
- On December 31st Centennial College pays for 2
months of maintenance services. The following December
31st Centennial College pays for 10 months of
maintenance services.
On November 15th Centennial College informs
Electronic Inc. that they will be not be able to pay their account
that is due. The two parties enter into an agreement that the
account will be converted into a non-interest bearing promissory
note to be repaid in one year from now. The maturity value of the
note is $67,098. Centennial College borrows fund at a rate of 6%.
Electronic Inc. has various loans at 5% interest. The company’s
yearend is December 31st.
- List the performance obligations?
- Explain when the revenue should be recognized for each
performance obligation under IFRS. Support your answer by
explaining why it should be recognized at the time you selected.
- Prepare the journal entries for 2020 and 2021. If there is no
entry be sure to state, no entry. Hint remember to allocate the
revenue among the different performance obligations and then use
this information when you prepare the journal entries.