Reference no: EM132990375

Question - Mr. Montague's Hotel is in Melbourne. Only packaged alcohol was allowed to be sold during the 2020 Melbourne Covid-19 pandemic lockdown as enforced by the State Government of Victoria. Cash flow was a real concern for owners of hotels during this difficult time.

Mr. Peter Davis, the owner of Mr. Montague's Hotel, instigated (created) a plan between the Hotel and loyal customers who attend the hotel on a regular basis. The plan was for customers to prepay for drinks and meals during the lockdown and then receive a voucher to be used for food and drink once the hotel reopened to all patrons (customers). This strategy would reduce the impact on liquidity.

Mr. Peter Davis provides the following financial data for the reporting period 1 July 2019 to 30 June 2020.

-Sales and service revenue earned before the Covid-19 lockdown from food and drink amounted to $120,000. All performance obligations were met.

-Prepaid vouchers for food and drink received in cash during the Covid-19 shutdown amounted to $35,000. These prepaid vouchers were redeemed (used) in December 2020.

-Sales of alcoholic and non-alcoholic and take away food during the Covid-19 lockdown amounted to $25,000.

Note: The business uses accrual accounting and disregard GST for this question. Reference should be made to AASB 15 Revenue from Contracts with Customers.

Required -

Question 1: What would be the recorded revenue earned for the reporting period from 1 July 2019 to 30 June 2020 by Mr. Montague's Hotel?

Question 2: In the financial period from 1 July 2019 to 30 June 2020, how would the prepaid vouchers be recorded using double-entry? No narration required.

Question 3: Justify your answer by referring to AASB 15 Revenue from Contract with Customers.

Question 4: What would be the impact on the accounting equation when the prepaid vouchers are redeemed (used) in December 2020 by the customers of Mr. Montague's Hotel and record the general journal? No narration required.