Alpha Ltd is a public company whose shares are listed on the TSX and has a December
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Question:
Alpha Ltd is a public company whose shares are listed on the TSX and has a December 31 fiscal year-end. In early 2020, Alpha entered into a contract with Beta Ltd. to deliver 250 photocopiers and provide two years of on-site maintenance service. The total contract consideration was $300,000. Alpha sells individual photocopiers at a price of $1,100 each. The maintenance agreements are also sold separately, with a two-year maintenance cost being $230 per photocopier. On April 1, Alpha delivered the 250 photocopiers. At various times throughout April to December, Alpha sent its technicians to do regular maintenance on all the machines.
Required:
- Allocate the transaction price of $300,000 to the two separate performance obligations (photocopiers and maintenance service )
- Give the journal entries to be made by Alpha related to the contract on April 1, 2020. Ignore the cost of goods sold. Assume sales are on credit.
April 1, 2020 | Debit | Credit |
- What is the total amount of maintenance revenue from this contract to be recognized in 2020?
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