Question

In: Accounting

Entity A is operated as an internet cafe, which locates in Hung Hom. It opens 24/7...

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 |

Journal Entries:

Date Account Name Debit ($) Credit ($) Hints For Sequence
1-Jan-19
31-Jan-19
Judge Dr/Cr side
Judge Dr/Cr side
Judge Dr/Cr side
1-Feb-19
An asset. Judge Dr/Cr side
Judge Dr/Cr side
28-Feb-19
Judge Dr/Cr side
28-Feb-19 A liability. Judge Dr/Cr side
Judge Dr/Cr side
1-Mar-19
An asset. Judge Dr/Cr side
Judge Dr/Cr side
31-Mar-19
Judge Dr/Cr side
31-Mar-19 A liability. Judge Dr/Cr side
Judge Dr/Cr side
1-Apr-19
An asset. Judge Dr/Cr side
Judge Dr/Cr side
30-Apr-19
Judge Dr/Cr side
30-Apr-19 A liability. Judge Dr/Cr side
Judge Dr/Cr side
1-May-19
An asset. Judge Dr/Cr side
Judge Dr/Cr side
31-May-19
Judge Dr/Cr side
31-May-19 A liability. Judge Dr/Cr side
Judge Dr/Cr side

Solutions

Expert Solution

Date Account Name Debit ($) Credit ($)
31-Jan-19 Entity A 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
1-Feb-19 Entity A A/c Dr $        10,000.00
To Contract liability (Technical support) A/c $        10,000.00
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
1-Mar-19 Entity A A/c Dr $        10,000.00
To Contract liability (Technical support) A/c $        10,000.00
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
1-Apr-19 Entity A A/c Dr $        10,000.00
To Contract liability (Technical support) A/c $        10,000.00
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
1-May-19 Entity A A/c Dr $        10,000.00
To Contract liability (Technical support) A/c $        10,000.00
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

Related Solutions

Entity A is operated as an internet cafe, which locates in Hung Hom. It opens 24/7...
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...
Entity A is operated as an internet cafe, which locates in Hung Hom. It opens 24/7...
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...
Question 1 “PhysicalFun” is a physical center which opens 24 hours per day. Each member of...
Question 1 “PhysicalFun” is a physical center which opens 24 hours per day. Each member of “PhysicalFun” has an access card. Members would be charged in a weekly basic (Sunday 12:00a.m. to Saturday 11: 59 p.m.) according to the accumulated number of hours of facilities used within a week. The weekly basic charge is $150 with an additional charge of $30 per hour. According to the company record, the number of hours a member spends in “PhysicalFun” in a week...
Question 1 “PhysicalFun” is a physical center which opens 24 hours per day. Each member of...
Question 1 “PhysicalFun” is a physical center which opens 24 hours per day. Each member of “PhysicalFun” has an access card. Members would be charged in a weekly basic (Sunday 12:00a.m. to Saturday 11: 59 p.m.) according to the accumulated number of hours of facilities used within a week. The weekly basic charge is $150 with an additional charge of $30 per hour. According to the company record, the number of hours a member spends in “PhysicalFun” in a week...
Question 1 “PhysicalFun” is a physical center which opens 24 hours per day. Each member of...
Question 1 “PhysicalFun” is a physical center which opens 24 hours per day. Each member of “PhysicalFun” has an access card. Members would be charged in a weekly basic (Sunday 12:00a.m. to Saturday 11: 59 p.m.) according to the accumulated number of hours of facilities used within a week. The weekly basic charge is $150 with an additional charge of $30 per hour. According to the company record, the number of hours a member spends in “PhysicalFun” in a week...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT