Question $3$

Enterprise Auto Inc. $($Enterprise$)$ sold a new limited$-$edition SUV to Millenium Ltd$.$ on

June $1,$ for $$155,000.$ The SUV has a normal selling price of $$173,000$ and thus the

price charged to Millenium is a special deal. Enterprise imported the SUV from Europe

at a landed cost of $$92,500.$ As part of the sale, Enterprise has included four free oil

changes Millenium can use within the first two years of purchase and an extended

five$-$year dealership warranty to cover any potential problems that may occur within

the first five years of purchase. Enterprise has a service department that routinely

provides oil changes to clients for $$249$ per change. The oil changes cost $$120$ per

change in supplies. Enterprise also sells the extended warranty on a stand$-$alone basis

for $$13,500.$ Enterprise has a December $31$ year end.

Instructions

Use the five steps of revenue recognition from IFRS $15$ to determine how Enterprise

should account for this transaction. Also prepare the journal entries Enterprise will

record for the first year, assuming that Millenium used the first of the four oil changes

on November $10.(27$ marks$)$