Reference no: EM132513824

CASHCO LIMITED

• Cashco Limited manufactures and sells standard portable cash-counting machines in its ordinary course of business. These standard single model cash-counting machines are used by various retail stores, banks and other cash businesses. Cashco Limited has a 31 December year-end.

• On 30 September 2015, Cashco Limited entered into a contract to manufacture and install 40 custom-made cash-counting machines for Mzansi Supermarkets Limited (MSL) at its only outlet in downtown Johannesburg. These cash-counting are to be specially designed and manufactured to attach and integrate to the existing tills at all of MSL till-points in its store. The specific design was tailored to assist in the counting, verification and in the packing of banknotes at each individual till point.

• Cashco Limited quoted MSL a total amount of R5.2 million for the contract. In terms of the contract, Cashco Limited agreed to design and manufacture the machines at their own premises, and thereafter to transport the 40 custom-made cash counting machines and complete the installation and integration of the machines with the tills at all of MSL's till points in its store. Installation and integration of the cash-counting machines was scheduled for 20 February 2016. Given the unique installation and integration specification, only the Cashco Limited technical team will be able to complete the installation and integration of the machines.

• In terms of the contract, 50% of the contract price was paid in advance on 30 September 2015, and an additional 20% was payable when the job was half completed. The balance was payable upon successful installation and integration of the machines in February 2016.

• At 31 December 2015, the sales division of Cashco Limited and the procurement manager of MSL agreed that the contract was 50% complete at that date. The additional 20% was duly received from MSL on 31 December 2015.

The only entries processed to account for this transaction in the 2015 year were as follows:

Dr Bank R3 640 000

Cr Revenue (P/L) (R3 640 000)

To account for the 50% deposit plus the 20% progress payment received

(70% x R5,2 million)

Question 1: Discuss the recognition and measurement of revenue arising on the contract with MSL for the manufacture, installation and integration of the cash-counting machines. (Ignore Taxation)