Provide the journal entries related to sales transaction

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Reference no: EM132809515

Question

Part A.two Stand-alone selling price Contract sales

FinTech Ltd. is a developer of cutting-edge trading platforms. On June 1, 2018, Thrifty Ltd. purchased trading terminals from FinTech Ltd., and FinTech agreed to perform complimentary installation service free of charge. Thrifty Ltd. also purchased a training package from FinTech Ltd. with a discount. The training package would entitle Thrifty to receive training and consultation services for 12 months.

Information about this sales contract and the associated costs is as follows:

Cost to FinTech Ltd.

Trading terminal

$500,000 each

$200,000 each

Installation service

$10,000

free

$5,000 (payable to the technician after successful job completion)

Training package

$60,000

$30,000

$24,000 (payable to training staff at the end of the training period)

Total

$1,030,000

Thrifty paid FinTech $1,030,000 on June 1, 2018. FinTech delivered the two trading terminals to Thrifty on June 15, 2018 and completed installation on that day. The training session started on July 1, 2018. FinTech has a fiscal year-end of December 31.

Please provide the journal entries related to the above transaction for FinTech Ltd. FinTech Ltd. keeps separate ledger accounts for trading terminals-, installation-, and training-related revenues and expenses. Please clearly indicate the dates of different journal entries. (12')

Part B. Electro Co. recently developed an incentive scheme that allows customers to defer payments to boost sales. On May 1, 2018, a customer signed a purchase agreement with Electro Co. for a television. The television had a list price of $10,000, which represents the price the customer had to pay if full-payment would be made on the purchase date.

The contract permitted the customer to return the television within 3 months, and Electro Co. did not have past experience regarding the return rate of the television.

After the expiration of the return period, the customer paid Electro Co. $5,500 on April 30, 2019 and $5,250 on April 30, 2020. The interest rate charged by Electro Co. is 5% per annum.

The television had a cost of $4,000. Electro Co. has a fiscal year-end of April 30.

(a) Can Electro Co. recognize sales revenue on May 1, 2018? Why? (2')

(b) Please provide the journal entries related to this sales transaction for Electro Co. Please clearly denote the dates of each journal entry. (7')

Reference no: EM132809515

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