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Prepare the journal entry to record Fantastic purchase

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Reference no: EM132908521

Question 1 - Fantastic Corporation manufactures faux leather garments. On June 1, 20X1, Fantastic made a sale to William Department Store under terms that require William to pay P150,000 to Fantastic on June 30, 20X1. In a separate transaction on June 15, 20X1, Fantastic purchased brand advertising services from William for P12,000. The fair value of those advertising services is P5,000. Fantastic expects that 3% of all sales will prove uncollectible.

Required -

1. Prepare the journal entry to record Fantastic's sale on June 1, 20X1.

2. Prepare the journal entry to record Fantastic's purchase of advertising services from William on June 15, 20X1. Assume all the advertising services are delivered on June 15, 20X1.

3. Prepare the journal entry to record Fantastic's receipt of P150,000 from William on June 30, 20X1.

4. How would Fantastic's expectation regarding uncollectible accounts affect its recognition of revenue from the sale to William on June 1, 20X1? Explain briefly.

Question 2 - Green Meadows sells potted plants to gardening shops. On December 6, 20X1, Green Meadows enter into a contract with Autumn Leaves to deliver 1,100 potted plants to Autumn Leaves at P15 per pot in three batches.

Delivery date Units delivered

December 20, 20X1 600

December 31, 20X1 350

January 16, 20X2 150

On December 20, 20X1, Autumn Leaves modifies the scope of the contract to include an order for an additional 400 potted plants to be delivered on January 23, 20X2. The agreed price for the additional 400 potted plants is P13 per pot, which is the stand-alone price of each of the additional pots on that date.

Deliveries are made as schedule. The financial year-end of Green Meadows is December 31, 20X1.

Required -

1. Calculate the revenue to be recognized by Green Meadows in

a. December 20X1

b. January 20X2

2. Assuming the same facts above except that the stand-alone price of each of the additional 400 potted plants is P15 per pot, calculate the revenue to be recognized by Green Meadows in

a. December 20X1

b. January 20X2.

Reference no: EM132908521

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