On 1ST January 2020 Afritem signed a contract with a customer agreeing to provide services over...

  

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On 1ST January 2020 Afritem signed a contract with a customer agreeing to provide services over a 3- year period at a contact price of R48 000, payable in advance. The estimated cost of providing the annual services is as follows. Required A Journal 1 Dr Year 1 Year 2 Year 3 Cr Estimated Cost (R) 12 000 A reasonable mark-up on cost for all performance obligations is considered to be 20%. Assume the following: ■ All services are performed at year-end. ■ The effect of any financing benefit is considered to be insignificant. ■ The three annual services are considered to be three separate performance obligations Prepare the journal entry to record the transaction at 1 January 2020 Debit Credit 18 000 27 000 Dr Cr Required B Journal 3 Dr Cr Required C Journal 6 Dr Cr Prepare the journal entry to record the transaction at 31 December 2020 Debit Credit Prepare the journal entry to record the transaction at 31 December 2021 Debit Credit On 1ST January 2020 Afritem signed a contract with a customer agreeing to provide services over a 3- year period at a contact price of R48 000, payable in advance. The estimated cost of providing the annual services is as follows. Required A Journal 1 Dr Year 1 Year 2 Year 3 Cr Estimated Cost (R) 12 000 A reasonable mark-up on cost for all performance obligations is considered to be 20%. Assume the following: ■ All services are performed at year-end. ■ The effect of any financing benefit is considered to be insignificant. ■ The three annual services are considered to be three separate performance obligations Prepare the journal entry to record the transaction at 1 January 2020 Debit Credit 18 000 27 000 Dr Cr Required B Journal 3 Dr Cr Required C Journal 6 Dr Cr Prepare the journal entry to record the transaction at 31 December 2020 Debit Credit Prepare the journal entry to record the transaction at 31 December 2021 Debit Credit

Answer rating: 100% (QA)

Solution As per the requirements laid down under IFRS 15 Revenue from contracts ... View the full answer