Question

The following information pertains to the customer contract: Contract price $ 250,000 Fair value of elevator installation service $ 5,000 Downpayment made by customer at time of contract signing $ 25,000 Cost of the elevator to Humphreys $ 150,000 Required: 1. 2. Prepare any required journal entries on April 2, April 15, and May 31. Assume that the customer pays for the elevator on May 31. Humphreys' Elevators sells and installs elevators for large commercial buildings. The installation process does not require changes to the elevator, so this service can be performed by any licensed professional. The selling price for the elevator is the same, regardless of whether Humphreys installs the elevator. On April 2, Humphreys enters into a contract to sell and install an elevator for a major commercial customer. The customer makes a downpayment on April 2. The balance of the contract price is due upon installation of the elevator. On April 15, Humphreys sells and delivers an elevator to the customer. This elevator is installed on May 31. Determine the appropriate allocation of the selling price to the different performance

Answer 1

Dear Student ,

BEFORE we are going to the answers , let discuss about the Accounting standard regarding the Revenue recognition from contract with costomers .

In the given picture given above, Lets Check the conditions one by one based on the given question ,

AS PER IFRS 15 , ANY OF THE CONDITIONS TO RECONGNISE THE INCOME ON PROGRESS BASIS WHERE NOT MET BY THE SAID CONTRACT.

SO REVENUE HAS TO BE RECOGNISED ATA SINGLE POINT OF TIME WHEN CONTROL IS TRANSFERRED , THAT IS ON THE DATE AT WHEN THE INSTALLATION IS COMPLETED AND INVOICING TO THE CUSTOMERS.

NOW LETS JOURLAZISE ,