QUESTION ONE Matrix X sells computer hardware and software components as well as other ancillary items...

 

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QUESTION ONE Matrix X sells computer hardware and software components as well as other ancillary items to customers all over South Africa. Matrix X also provides installation of hardware and software that customers have purchased elsewhere. The company also provides maintenance services of hardware and software to customers whose units have been installed by other suppliers. Matrix X prides itself on being specialists in their field with good value for money as well as excellent after sales service. You are requested to address the following issue in relation to Matrix X for the current financial year ending 31 December 2020: Matrix X recently secured a non-cancellable contract with Miradep Limited to supply, install and maintain 55 hard drives and software at a price of R22 500 each. The two-year contract was signed on 1 April 2020 by both parties. The following information relates to the units included in the contract: Hardware unit: The units were sourced by Matrix X from their supplier at a cost of R11 500 each. These units can be sold individually for R16 000 each by Matrix X. Installation: Fitment of hardware and software costs Matrix X R500 per unit. A mark-up on installation cost of 50% is applied by Matrix X. The installation of all 55 hardware and software for Miradep Limited will be carried out on 30 April 2020. Maintenance: Hardware and software are required to be serviced on an annual basis on 31 December. The contract provides for a two-year maintenance plan. Matrix X offers maintenance to customers who have purchased hardware and software from other entities at a cost of R1 000 per unit per service. Payment of the full purchase price of R22 500 per unit is required to be made by the customer in full by 31 December 2020. The financing component on this contract is considered insignificant. ● b) ● ● ● Required: a) [40] Discuss how the contract with Miradep Limited should be treated in the annual financial statements of Matrix X Limited in terms of International Financial Reporting Standards. Your answer must be limited to recognition and measurement issues only. Prepare the journal entries in the accounting records of Matrix X Limited to record the contract with Miradep Limited for the year ended 31 December 2020. (25) (15) QUESTION ONE Matrix X sells computer hardware and software components as well as other ancillary items to customers all over South Africa. Matrix X also provides installation of hardware and software that customers have purchased elsewhere. The company also provides maintenance services of hardware and software to customers whose units have been installed by other suppliers. Matrix X prides itself on being specialists in their field with good value for money as well as excellent after sales service. You are requested to address the following issue in relation to Matrix X for the current financial year ending 31 December 2020: Matrix X recently secured a non-cancellable contract with Miradep Limited to supply, install and maintain 55 hard drives and software at a price of R22 500 each. The two-year contract was signed on 1 April 2020 by both parties. The following information relates to the units included in the contract: Hardware unit: The units were sourced by Matrix X from their supplier at a cost of R11 500 each. These units can be sold individually for R16 000 each by Matrix X. Installation: Fitment of hardware and software costs Matrix X R500 per unit. A mark-up on installation cost of 50% is applied by Matrix X. The installation of all 55 hardware and software for Miradep Limited will be carried out on 30 April 2020. Maintenance: Hardware and software are required to be serviced on an annual basis on 31 December. The contract provides for a two-year maintenance plan. Matrix X offers maintenance to customers who have purchased hardware and software from other entities at a cost of R1 000 per unit per service. Payment of the full purchase price of R22 500 per unit is required to be made by the customer in full by 31 December 2020. The financing component on this contract is considered insignificant. ● b) ● ● ● Required: a) [40] Discuss how the contract with Miradep Limited should be treated in the annual financial statements of Matrix X Limited in terms of International Financial Reporting Standards. Your answer must be limited to recognition and measurement issues only. Prepare the journal entries in the accounting records of Matrix X Limited to record the contract with Miradep Limited for the year ended 31 December 2020. (25) (15)

Answer rating: 100% (QA)

a The contract with Miradep Limited should be treated as a construction contract ... View the full answer