Reference no: EM132992419
Questions -
Q1. On January 1, 2020, DDD Company entered into a contract with a customer to build an item of specialized equipment for delivery on April 30, 2020. However, the exact delivery date is hard to estimate. The amount of consideration specified in the contract is P300,000, but the customer is willing to pay a higher price if delivered earlier (i.e., amount will be increased or decreased by P500 for each day, depending on whether the actual delivery date is before or after April 30, 2020).
Below is the sensitivity analysis:
20% likelihood that product will be delivered on April 30, 2020;
50% likelihood that product will be delivered 30 days before April 30, 2020; and
30% likelihood that product will be delivered 30 days after April 30, 2020.
How much is transaction price for this contract?
Q2. On November 10, 2020, EEE Company enters into a contract with a private company to deliver 2 Dining Set, 2 Sofa and 5 Cabinets for a lumpsum price of P500,000. It is stipulated in the contract that payment is made only upon delivery of all the orders, though the items may be delivered in installment. The stand-alone prices of the items are: Dining Set - P80,000 per set; Sofa - P100,000 per set; and Cabinet - 40,000 per piece.
On December 20, 2020, the following were delivered: 1 Dining Set, 1 Sofa and 3 Cabinets. The remaining items were delivered on January 15, 2021.
Determine the following:
a. How many performance obligations are there in the contract?
b. How much is revenue to be recognized in 2020 and 2021?
c. Entries to record the transactions in 2020 and 2021.
Q3. During year 1, Kaila Co. issued 5,000 shares of 100 par convertible preferred stock for 110 per share. One share of preferred stock can be converted into three shares of Kaila's 25 par common stock at the option of the preferred shareholder. On December 31, year 3, when the market value of the common stock was 40 per share, all of the preferred stock was converted. What amount should Kaila credit to Common Stock and to Additional Paid-in Capital-Common Stock as a result of the conversion?
Common stock Additional paid-in capital
a. 375,000 175,000
b. 375,000 225,000
c. 500,000 50,000
d. 600,000 0
Q4. In 2019, Kyutsi-a Co. acquired 10,000 shares of its P1 par value common stock at P6 per share. During 2020, Kyutsi-a Co. issued 3,000 of these shares at P50 per share. Kyutsi-a Co. uses the cost method to account for its treasury stock transactions. What is the balance of the treasury stock from the issuance of the 3,000 shares?
a. P108,000
b. P42,000
c. P6,000
d. P102,000