What are the performance obligations for the transaction

Assignment Help Accounting Basics

Reference no: EM132728169

Question 1 - Organic Growth Company sells plant seed products. As part of a promotion, The company grants unconditional returns to its five main customers for the product considered unsatisfactory. The right to return is valid for four months. Past experience Organic Growth shows that the normal rate of return is 20% (company using the allowance method). Organic Growth sells the seeds on credit of $ 1,500,000 (at a cost of $ 750,000) on January 2, 2019. Customers are required pay the amount due by March 15, 2019.

Instructions -

a. Keep the journal necessary for Organic Growth on January 2, 2019!

b. Assume that one customer returns seeds on March 1, 2019 due to poor performance. Keep a journal to record these transactions, if customers buy $ 100,000 worth of seeds from Organic Growth! (customer yet pay off these receivables).

c. Assume that Organic Growth prepares quarterly financial reports. Make it up entries required (if any) to adjust for the above transaction as of March 31 2019, assuming that the expected return is $ 200,000.

Question 2 - PT Teknologi Makmur Jaya (PT TMJ) sells high-tech equipment used by big companies. The selling price is determined by agreement with the customer. Products sold include installation and maintenance services. The installation process is not involves changing features of the equipment and does not require owner information regarding the equipment to perform the installation. PT TMJ entered into an agreement with PT DEF as follows:

PT DEF purchased equipment from PT TMJ for $ 6,000,000 including installation and maintenance (cost of equipment was $ 1,000,000). PT TMJ sells with the same price with or without installation (some companies do the installation itself because of preferences, data security, and have a relationship services with other companies). Installation services in the agreement are estimated to have the stand-alone price is $ 2,000,000.

The stand-alone sale price for maintenance is estimated at $ 1,000,000. Company others can also perform these maintenance services.

Payment terms are $ 6,000,000 due immediately by way of transfer on time delivery and installation of equipment. The control transfer occurred on the same day.

PT TMJ delivered the equipment on 15 September 2019 and completed equipment installation on November 1, 2019 (control transfer completed). Billing and the payment occurred on the same date. Equipment maintenance starts 1 months after the installation is complete and will last for 1 year.

The equipment has a useful life of 15 years.

a. What are the performance obligations for the above transaction?

b. If there is more than 1 performance obligation, how to allocate payment of $ 6,000,000 to each of these performance obligations?

c. Prepare the journals needed to record the above transactions! [15 Sep 2019; Nov 1 2019; 31 Dec 2019; and 31 Dec 2020 assuming an adjusting entry only done at the end of the year.

Reference no: EM132728169

Questions Cloud

Find what marigold net cash provided by operating activities : Find What was Marigold's net cash provided by operating activities? Collected $365000 from customers. Paid $84500 to purchase office equipment.

Describe the characteristics of your fictitious agency : Describe the characteristics of your fictitious agency or organization. Establish the specific problem the proposed project will address.

What are computerized accounting systems : What are computerized accounting systems? Are computerized accounting systems different than manual accounting systems? How are these different

How you will implement changes to achieve the standards : The Institute of Medicine defines quality as "the degree to which health services for individuals and populations increase the likelihood of desired health.

What are the performance obligations for the transaction : The stand-alone sale price for maintenance is estimated at $ 1,000,000. What are the performance obligations for the above transaction

Create scholarly arguments : Engaged, curious reading is an essential first step toward being able to create scholarly arguments.

What the net income reported by bonita industries : What The net income reported by Bonita Industries for the month of June was? Bonita Industries started the month of June 2022 with total assets of $212000

Describe the models of organizational change : Discuss an EBP initiative that was implemented in a health care setting (use fictitious names for people and places) and whether it was successful.

Make the journal entries to record purchase of raw materials : Make the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs

User Account

All Pages