Eco Appliances Ltd. (EAL), a company that follows IFRS, manufactures environmentally friendly appliances that are great...

 

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Eco Appliances Ltd. (EAL), a company that follows IFRS, manufactures environmentally friendly appliances that are great demand due to growing awareness of climate change and global warming. Pricing and cost information for EAL's main products is as follows: Item Combined laundry unit Refrigerator Stove Stand-Alone Selling Price (Cost) $1,050 (600) $ 780 (390) $ 840 (430) Customers are able to purchase any of the three items individually at the stated prices or can obtain a three-item bundle for a price of $2,500, which includes delivery and installation. EAL provides delivery and installation as a stand-alone service for any of its products for $250. Required (25 marks): Assuming that each of the following scenarios are separate revenue arrangements for EAL, answer what is required for each. a) Haunted Condo Corporation (HCC) owns multiple condo complexes across western Canada. On April 1, 2021, EAL signs a contract with HCC for 200 appliance bundles to be delivered and installed in two of its new buildings in Brandon. HCC pays 30% cash at contract signing and will pay the balance upon delivery and installation no later than August 1, 2021. a. Prepare journal entries for EAL on (1) April 1, 2021, and (2) August 1, 2021 when the appliances are delivered and installed. b) On September 1, 2021, EAL sold 160 combined laundry units without installation to Spooky Times Inc. (STI) on credit. STI is uncertain how these new, "greener" appliances will work so EAL offers a 60-day return privilege and estimates, based on past experience with sales of these products, that 5% of the units will be returned. a. Prepare journal entries for the sale and COGS on September 1, 2021. c) Nightmare Rental Ltd. (NRL) is building a new rental property in the south end of Brandon. The rental property will consist of 80 units and on March 1, 2021, EAL signs a contract with NRL for delivery and installation of 80 bundles. Under this agreement, EAL will hold the appliance bundles in its warehouses until the new rental property is ready to have the appliances delivered and installed. NRL pays 15% cash at contract signing. On May 1, 2021, EAL completes the manufacture of the appliances in the NRL bundle order and places them in their warehouse. Both EAL and NRL have documented the warehouse arrangement and identified the units designated for NRL. The units are ready to ship and EAL may not sell these units to other customers. a. List the criteria that need to be met for control to pass under a bill-and-hold arrangement. b. Conclude if control has passed. c. Prepare journal entries for EAL on (1) March 1, 2021 and (2) May 1, 2021. Eco Appliances Ltd. (EAL), a company that follows IFRS, manufactures environmentally friendly appliances that are great demand due to growing awareness of climate change and global warming. Pricing and cost information for EAL's main products is as follows: Item Combined laundry unit Refrigerator Stove Stand-Alone Selling Price (Cost) $1,050 (600) $ 780 (390) $ 840 (430) Customers are able to purchase any of the three items individually at the stated prices or can obtain a three-item bundle for a price of $2,500, which includes delivery and installation. EAL provides delivery and installation as a stand-alone service for any of its products for $250. Required (25 marks): Assuming that each of the following scenarios are separate revenue arrangements for EAL, answer what is required for each. a) Haunted Condo Corporation (HCC) owns multiple condo complexes across western Canada. On April 1, 2021, EAL signs a contract with HCC for 200 appliance bundles to be delivered and installed in two of its new buildings in Brandon. HCC pays 30% cash at contract signing and will pay the balance upon delivery and installation no later than August 1, 2021. a. Prepare journal entries for EAL on (1) April 1, 2021, and (2) August 1, 2021 when the appliances are delivered and installed. b) On September 1, 2021, EAL sold 160 combined laundry units without installation to Spooky Times Inc. (STI) on credit. STI is uncertain how these new, "greener" appliances will work so EAL offers a 60-day return privilege and estimates, based on past experience with sales of these products, that 5% of the units will be returned. a. Prepare journal entries for the sale and COGS on September 1, 2021. c) Nightmare Rental Ltd. (NRL) is building a new rental property in the south end of Brandon. The rental property will consist of 80 units and on March 1, 2021, EAL signs a contract with NRL for delivery and installation of 80 bundles. Under this agreement, EAL will hold the appliance bundles in its warehouses until the new rental property is ready to have the appliances delivered and installed. NRL pays 15% cash at contract signing. On May 1, 2021, EAL completes the manufacture of the appliances in the NRL bundle order and places them in their warehouse. Both EAL and NRL have documented the warehouse arrangement and identified the units designated for NRL. The units are ready to ship and EAL may not sell these units to other customers. a. List the criteria that need to be met for control to pass under a bill-and-hold arrangement. b. Conclude if control has passed. c. Prepare journal entries for EAL on (1) March 1, 2021 and (2) May 1, 2021.

Answer rating: 100% (QA)

a Journal entries for EAL 1 April 1 2021 Contract signing Accounts Receivable HCC Dr 500000 30 of 2500000 Contract Liability Cr 500000 This entry reco... View the full answer