Module $3\mathrm{.}1-$ Workshop Activity

QUESTION $1$

On September $25,$ Olive Oil Distributors receives an order from DeNarda Italian Supermarkets for $125$ cases of extra virgin olive oil.

Olive Oil accepts the order, which needs to be delivered to DeNarda$$s warehouse and DeNarda agrees to pay within $30$ days of the receipt of the product.

Each case of extra virgin olive oil contains $12$ bottles at a selling price of $$7\mathrm{.}50$ each. Olive Oil$$s cost is per bottle is $$3.$

The shipment is received at DeNarda$$s warehouse on Oct $2$ and DeNarda mails a cheque to Olive Oil at the end of the agreed upon payment terms.

Olive Oil Distributors used a contact based approach to revenue recognition.

Required:

a$)$ Identify the five steps of revenue recognition

b$)$ Apply case facts to each of the steps in $($a$)$ above

c$)$ Assuming the criteria are met, record Olive Oil$$s entries related to these transactions.

QUESTION $2$

On January $2,2023$ Geek Computers enters into a contract with Bison Protection, a well$-$established fire protection company

to upgrade and install new computers at $65$ work stations. As part of the contract Geek Computers also agrees to connect and

network all of the computers. Contract details include the following:

$$ The total contract price is: $67,500$

$$ The total normal retail price of the computers is: $50,400$

$$ For installation services, Geek Computers would normally charge: $12,240$

$$ For networking services, Geek Computers would normally charge: $9,360$

$$ Each computer cost Geek Computers $500$

$$ The contract requires Geek Computers to deliver the computers by January $25,2023$ and have the installation

and networking completed by February $15,2023.$

$$ Bison agrees to pay $$45,000$ upon the delivery of the computers and the final payment was made February $28.$

$$ Geek Computers uses the contact based approach for revenue recognition.

Required:

Record Geek Computer$$s entries related to these transactions.

Hint: You need to allocate the transaction price to the goods$/$services that Geek is providing:

Computers, installation, and networking services

QUESTION $3$

The following information is related to the December $31,2022$ and December $31,2023$ yearend.

ABC company reported the following accounts receivable information for December $31,2022$:

CLIENT less than $30$ days $30-60$ days $60-90$ days $90$ day $+$ TOTAL

Vernon Inc. $32,00014,0002,0002,00050,000$

Axel Mechanics $10,000---10,000$

Ginny Supply $---12,00012,000$

Total $42,00014,0002,00014,00072,000$

Estimated uncollectible $\%1\%7\%25\%60\%$

Prior to any adjustments, the balance in the allowance for expected credit losses account at December $31,2022$ was

$$5,000.$

On May $1,2023$ ABC was informed that Ginny Supply was bankrupt and payment of account would not be made.

ABC company reported the following accounts receivable information for December $31,2023$:

CLIENT less than $30$ days $30-60$ days $60-90$ days $90$ day $+$ TOTAL

Vernon Inc. $41,0002,000-5,00048,000$

Supplio $7,750450--8,200$

Freya Corp. $12,000-1,500-13,500$

Total $60,7502,4501,5005,00069,700$

Estimated uncollectible $\%1\%6\%20\%75\%$

Required:

Record the adjustment journal entry at Dec $31,2022$ and all journal entries for $2023$ related to the calculation and

allowance of uncollectible accounts receivable.