MANAL GROUP sells Equipment In addition providing accessories, installation and maintenance services. MANALGROUP Company performed the following revenue transactions during 2000: A- ALMAJED .CO. enters into a contract with MANALGROUP Co. to purchase 1500 Equipment during 2000. The Equipment are priced at $9000 each (with a cost of $7500 each), and MANAL GROUP provides a 6% volume discount if ALMAJED .CO. purchases at least 900 Equipment. Based on prior experience with the transactions with ALMAJED .CO., the Co. will meet the discount threshold. On March 17, 2000, MANAL GROUP Co. sold and delivered 600 Equipment to ALMAJED .CO. and recorded sales net. On May 1, 2000 MANAL GROUP Co. received the payment from ALMAJED .CO. (assume ALMAJED .CO. fails to meet the discount threshold).

B- MANAL GROUP Company offers contract AB102, which is comprised of a free-standing machine plus installation it to a customer for a total price $18000. On a standalone basis, the machine sells for $15000 (cost $12000), and MANAL GROUP Co. estimates that the standalone selling price of the installation service is $9000. Note that installation service can be performed by other companies. On June 10, 2000, MANAL GROUP Co. signed AB102 contract and delivered a machine to Al Fatah Co. The customer paid the contract price in cash in the same date. On July 5, 2000, the installation service was performed.

c- On November 1, 2000, MANAL GROUP sold and delivered 4 Equipment to a builder for 60000. The builder plans to install it in one of its “Parade of Homes” houses. MANAL GROUP accepted a 3-year, zero-interest bearing note with face amount of $79860. The Equipment have an inventory cost of $40500. An interest rate of 12% is an appropriate market rate of interest for this customer.

Instructions: 1- Apply the five steps of revenue recognition process for the previous transactions , write your answer in a table as follows:

Step1: Identify the contract with customers. 

Step2: Identify the separate performance obligations in the contract.

Step3: Determine the transaction price.

Step4: Allocate the transaction price to the separate performance obligations.

Step5: Recognize revenue when each performance obligation is satisfied.

2- Prepare the needed entries to record the previous transactions in MANAL GROUP books during 2000.

3- Prepare income statement and statement of financial position (for only the sections that are affected by these transactions) to reflect the effects of previous transactions on them

Answer rating: 100% (QA)

Answer to Question 1 Step 1 Identify the Contract with Customers A The contract between MANAL Group and ALMAJED CO is for the purchase of 1500 Equipment during 2000 with a discounted price of 9000 eac... View the full answer