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Please, I need a correct answers. Thank you, Application Problem On February 13, 2018, MacMulka entered...

Please, I need a correct answers. Thank you,

Application Problem

On February 13, 2018, MacMulka entered into a contract with Samdon to supply 10 advanced baby monitors in their daycare facility. Details of the contract are as follows:

The contract is worth $14,500 and includes the supply and complete installation of the monitors.

The individual machines can be purchased for $1,400 each.

The cameras are purchased in bulk from a third party at a cost of $800 each.

When MacMulka does installation and configuration work for other customers, they normally charge $120 per machine. This work includes both the physical installation and the configuration. It is estimated that 80% of the total time spent is on the configuration of the software.

The contract requires the cameras to be installed by March 15, 2020.

Required:

Apply the IFRS 15 - 5 step model to the above transaction.

Prepare the journal entries

Expert Solution

IFRS 15 - REVENUE FROM CONTRACTS WITH CUSTOMERS, DEFINES WHEN THE REORTER WILL RECOGNISE REVENUE. THE STANDARD PROVIDES A SINGLE , PRINCIPLES BASED 5 STEP MODEL TO BE APPLIED TO ALL CONTRACTS WITH CUSTOMERS. WE WILL SOLVE THE PROBLEM WITH THESE STEPS

STEP 1 IDENTIFY THE CONTRACT WITH THE CUSTOMER

WHEN THE PATIES AGREED,& RIGHTS TO BE TRANSFERED CAN BE IDENTIFIED;& THE PAYMENT TERMS CAN BE IDENTIFIED;& CONTRACT HAS COMMERCIAL SUBSTANCE;& IT IS PROBABLE THAT CONSIDERATION WILL BE COLLECTED.

CONTRACT WILL IDENTIFIED. WE FOUND THAT ALL OF ABOVE CRITERIA MEET SO CONTRACT IS THERE.

STEP 2 IDENTIFY THE PERFORMANCE OBLIGATION = YES EXIST IN OUR CASE

STEP 3 DETERMINE THE TRANSACTION PRICE = CLEARLY STATED = $ 14500

STEP 4 ALLOCATE THE TRANSACTION PRICE - AS WE SAW THE CONTRACT HAS ONE PERFORMANCE OBLIGATION. THE STANDALONE PRICE IS IDENTIFIABLE.ON A STAND ALONE SELLING PRICE BASIS THE ALLOCATION IS

MACINES= $1400EACH= $14000

CAMERAS = $800EACH = $8000

SO EQUIPMENT COST = $14000+$8000 = $22000

INSTALLATION CHANGES = $120 * 20% = $24 EACH MACHINE AND TOTAL $240

CONFIGURATION CHARGES = $120* 80% = 96*10 = $960

STEP 5 RECOGNISE REVENUE WHEN THE ENTITY SATISFY A PERFORMANCE OBLIGATION.

JOURNAL ENTRIES

DATE	PARTICULARS	DEBIT	CREDIT

FEB 13	SAMDON	14500
	CONTRACT LIABLITY		14500

	EQIPMENT COST	22000
	BANK		22000

0

CONFIGURATION CHARGES= VALUE OF TOTAL CONTRACT LESS ABOVE STAND

CONFIGRATION CHARGES =

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