I January 2016, Impress Supplies Sdn Bhd (ISSB) enters into two contracts (Contract A and Contract...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
I January 2016, Impress Supplies Sdn Bhd (ISSB) enters into two contracts (Contract A and Contract B) with customers that are similar except for termination provisions. Each is for the sale of 10,000 customized parts at RMI00 per part. On 31 March 2016, ISSB produced and held a total of 4,000 parts of finished goods and an additional 100 parts in WIP with costs-to- date of RM5,000. The total cost to produce each part is RM90. Contract A Contract A states that if the contract is terminated, the customer is required to pay the full price for all finished goods on hand. For parts in process, the customer is required to pay ISSB its cost plus 10% which is the expected margin on the finished goods. The parts have no alternative use to ISSB. As such, if the contract is terminated on 31 March 2016, ISSB would be entitled to RM405,500 (RM100 for the 4,000 finished goods and cost of RM5,000 plus 10% for the 100 parts in WIP). Contract B Contract B states that if the contract is terminated, the customer is required to pay the full price for all finished goods on hand and only ISSB's cost for any parts in WIP. The parts have alternative use to ISSB. As such, if the contract is terminated on 31 March 2016, ISSB would be entitled to RM405,000 (RM100 for the 4,000 finished goods and cost of RM5,000 for the 100 parts in WIP). Required: a) Describe when the company can recognize its revenue from contract. (8 marks) (CLO2-PLOS:C5) b) Determine how should ISSB recognizes revenue from contract A and B. Elaborate (6 marks) (CLO2:PLOS:C5) your answer. e) Advice the accountant for ISSB regarding the disclosure requirement as per stated in Malaysian Financial Reporting Standards (MFRS) 15 Revenue from Contract. (8 marks) (CLO2:PLOS:CS) d) Explain at least TwO (2) importance of MFRS 15 for companies which handie many types of contracts. I January 2016, Impress Supplies Sdn Bhd (ISSB) enters into two contracts (Contract A and Contract B) with customers that are similar except for termination provisions. Each is for the sale of 10,000 customized parts at RMI00 per part. On 31 March 2016, ISSB produced and held a total of 4,000 parts of finished goods and an additional 100 parts in WIP with costs-to- date of RM5,000. The total cost to produce each part is RM90. Contract A Contract A states that if the contract is terminated, the customer is required to pay the full price for all finished goods on hand. For parts in process, the customer is required to pay ISSB its cost plus 10% which is the expected margin on the finished goods. The parts have no alternative use to ISSB. As such, if the contract is terminated on 31 March 2016, ISSB would be entitled to RM405,500 (RM100 for the 4,000 finished goods and cost of RM5,000 plus 10% for the 100 parts in WIP). Contract B Contract B states that if the contract is terminated, the customer is required to pay the full price for all finished goods on hand and only ISSB's cost for any parts in WIP. The parts have alternative use to ISSB. As such, if the contract is terminated on 31 March 2016, ISSB would be entitled to RM405,000 (RM100 for the 4,000 finished goods and cost of RM5,000 for the 100 parts in WIP). Required: a) Describe when the company can recognize its revenue from contract. (8 marks) (CLO2-PLOS:C5) b) Determine how should ISSB recognizes revenue from contract A and B. Elaborate (6 marks) (CLO2:PLOS:C5) your answer. e) Advice the accountant for ISSB regarding the disclosure requirement as per stated in Malaysian Financial Reporting Standards (MFRS) 15 Revenue from Contract. (8 marks) (CLO2:PLOS:CS) d) Explain at least TwO (2) importance of MFRS 15 for companies which handie many types of contracts.
Expert Answer:
Answer rating: 100% (QA)
Answer 1 Recognizing Revenue in Accordance with Performance Recall the conditions for revenue recognition Conditions 1 and 2 state that revenue would be recognized when the seller has done what is exp... View the full answer
Posted Date:
Students also viewed these finance questions
-
An FI is underwriting the sale of 1 million shares of Ultrasonics, Inc., and is quoting a bid-ask price of $6.00-$6.50. a. What are the fees earned by the FI if a firm commitment method is used to...
-
A television station is considering the sale of promotional videos. It can have the videos produced by one of two suppliers. Supplier A will charge the station a set-up fee of $1,200 plus $2 for each...
-
A production line will be used to manufacture an item. The line will be operated with using the same personnel during single shift operations. During the initial line certification, the first item...
-
How is fair value estimated?
-
Mountain Climbing Mountaineers often use a rope to lower themselves down the face of a cliff (this is called rappelling). They do this with their body nearly horizontal and their feet pushing against...
-
On January 1, 2018, Ranier, Inc., issued \(\$ 300,000\) of ten percent, 15 -year bonds for \(\$ 351,876\), yielding an effective interest rate of eight percent. Semiannual interest is payable on June...
-
Peggy Company owns 75% of Sally Inc. and uses the cost method to account for its investment. The following data were taken from the Year 4 income statements of the two companies: In Year 2, Sally...
-
Case study. Boatrite Manufacturing Auditing. List three questions you and your firm should ask the prior CPA before accepting Boatrite as an auditing client
-
Find the output voltage vo(t) in the circuit of Fig. 8.94. t=0 10 512
-
100 surnames were randomly picked up from a local telephone directory and a frequency distribution of the number of letters in the English alphabet in the surnames was found as follows (i) Draw a...
-
How does the auditors professional duty of confidence affect disclosures to third parties?
-
When can auditors disclose unlawful acts to the police?
-
What should auditors do if they discover an unlawful act?
-
List some physical controls.
-
What are the circumstances in which auditors can make disclosures without permission from their client?
-
100% All-Stars: Greenblatt 50% {0} + ROC - Greenblatt f(x) 50% {0} + Egs Yld - Greenblatt f(x)
-
Cable Corporation is 60% owned by Anna and 40% owned by Jim, who are unrelated. It has noncash assets, which it sells to an unrelated purchaser for $100,000 in cash and $900,000 in installment...
-
Steven Myer and William Riggs are partners in an existing business. Each partner has equity of \($30,000.00.\) On October 1 of the current year, the two partners agree to admit Sandra DeVito as a...
-
Stanley Neal and Helen Jobe each have equity of $40,000.00 in an existing partnership. The partners share equally in all changes in equity. On August 1 of the current year, the existing partners...
-
Susan Wang and Lelah Burch are partners in an existing business. Each partner has $60,000.00 equity in the partnership. Partners share equally in all changes in equity. On April 1 of the current...
Study smarter with the SolutionInn App