Question $2(25$ marks$)$

Susie Interior Design Limited $("$Susie$")$ provides interior design, project management and

maintenance services for small flats in Hong Kong. The company had just promoted a new

"Art$-$Deco Package" with the following list prices in Year $2022$:

Customers may order any of the service listed above independently, or in the form of

"Art$-$Deco Package" to include all. On $1$ December $2022,$ the company signed a contract

with a customer to provide the "Art$-$Deco Package" to furnish the customer's newly

purchased flat in Yuen Long which has a total area of $400$ sqf$.$ Under the terms of the

contract, Susie Interior Design Limited would provide the following:

$($a$)$ Provide customized design for the flat as per customer's requirement and taste;

$($b$)$ Provide project management service for the entire furnishing period; and

$($c$)$ Provide maintenance services for the flat for a period of two years $($Year $2023$ and

$.$

The total contract price was $$700,000.$ The customized design was completed on $1$ January

$2023$ and the furnishing project also started on that day. In addition, the contract was signed

under a financing agreement. It was agreed that the customer would pay the customized

interior design fee two years later with nil interest, i$.$e$.$ on $31$ Dec $2024.$ The market interest

rate was $8\%.$ The amount for the project management service would be paid in the

following proportion: $40\%$ on $31$ Dec $2023$ and $60\%$ on $31$ Dec $2024.$ The amount for

maintenance service would be paid in two equal installments on $31$ Dec $2023$ and $2024.$

Required:

Explain how Susie Interior Design Limited should recognize the revenue in accordance

with HKFRS $15$ Revenue from Contracts with Customers and prepare the journal entries

to record those transactions for the year ended $31$ December $2023$ and $2024.$