a) On 1 January 2020 Ltd enters into a contract to transfer a product to a B

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Question:

a) On 1 January 2020 Ltd enters into a contract to transfer a product to a B Ltd on 31 March 2020. The contract is cancellable in case of unsatistfactory performance by any of the parties. The contract requires the B Ltd to pay consideration of N$30 000 in advance on 31 January 2020. B Ltd pays the consideration on 1 March 2020. The entity transfers the product on 31 March 2020.

b) Assume the same facts as in (a). The contract is however not cancellable.

c) On 1 January 2020 an entity enters into a contract to transfer Products A and B to B Ltd in return for consideration of N$100 000. The contract requires Product A to be delivered first and states that payment for the delivery of Product B. In other words, the consideration of N$100 000 is due only after A Ltd has transferred both Products A and B to the customer. The supply of the two products are considered to be separate performance obligations. The stand alone prices an inception of the contract are as follow: Product A N$35 000 Product B N$65 000 A Ltd delivers product A to B Ltd on 31 January 2020 and Product B on 28 February 2020. B Ltd settles the amount due on 5 March 2020.

d) A Ltd entity enters into a contract with B Ltd on 1 July 2020 to transfer products to B Ltd at N$2 000 per products in a calendar year, the contract indicates B Ltd will retrospectively receive a rebate of N$200 per product. Legal title to the products passes to B Ltd on date of delivery and in terms of the contract, B Ltd has to settle the sales consideration on date of delivery. A Ltd delivered two batches of products to B Ltd during the financial year ended 31 December 2020: On 31 July 2020, 300 products were delivered to B Ltd who settled the amount on the same date. On 25 December 2020, 350 products were delivered to B Ltd who settled the amount on 5 January 2021. At inception of the contract, experience shows that B Ltd will acquire more than 1 000 products during the year from 1 July 2020 to 30 June 2021.

Required:

In each of the cases, provide the general journal entries arising from the transactions in the accounting records of A Ltd for the reporting period ended 31 December 2020. Give reasons for the entries in the form of a journal narration.