QUESTION 4: REVENUE (9 Marks) TOPCHEF Ltd provides cooking classes and sells related products. The cooking...

Transcribed Image Text:

QUESTION 4: REVENUE (9 Marks) TOPCHEF Ltd provides cooking classes and sells related products. The cooking classes provided range from beginners' classes (that are around ½ hour long) to expert master chef classes (that can be up to 3 hours long). Customers need to book into classes online (at least 24 hours prior to the starting time of the class). On 1 August 2023, Tanner signed a 6-month contract with TOPCHEF Ltd and paid $280.00 in cash. This payment allowed Tanner to book into 8 hours of cooking classes for the month ending 31 August 2023. The payment included a one-off fee for a card of $120. Tanner received a card, which had a password that allowed him to access the TOPCHEF booking site and book into specific cooking classes. Under the contract, Tanner will be required to make a further 5 payments of $160 per month (payable at the beginning of each month starting on 1 September 2023). The accountant for TOPCHEF Ltd has recognised the $120 paid for the booking card as revenue on the 1 August 2023. REQUIRED Explain in your own words how and when revenue is to be recognised in this case (and why). 1) Explain whether the accountant is correct (whether the $120 paid for the booking card can be recognised as revenue on 1 August 2023). If the accountant is incorrect, explain when the $120 paid for the card should be recognised as revenue and why. (You need to give reasons and explain in your own words) 2) [6 marks] Prepare the journal entry/s required by TOPCHEF Ltd to account for the above on 1 August 2023. (Hint: Please ensure that all account titles used clearly indicate nature of account. I.e., whether asset, liability, revenue or expense.) [3 marks] QUESTION 4: REVENUE (9 Marks) TOPCHEF Ltd provides cooking classes and sells related products. The cooking classes provided range from beginners' classes (that are around ½ hour long) to expert master chef classes (that can be up to 3 hours long). Customers need to book into classes online (at least 24 hours prior to the starting time of the class). On 1 August 2023, Tanner signed a 6-month contract with TOPCHEF Ltd and paid $280.00 in cash. This payment allowed Tanner to book into 8 hours of cooking classes for the month ending 31 August 2023. The payment included a one-off fee for a card of $120. Tanner received a card, which had a password that allowed him to access the TOPCHEF booking site and book into specific cooking classes. Under the contract, Tanner will be required to make a further 5 payments of $160 per month (payable at the beginning of each month starting on 1 September 2023). The accountant for TOPCHEF Ltd has recognised the $120 paid for the booking card as revenue on the 1 August 2023. REQUIRED Explain in your own words how and when revenue is to be recognised in this case (and why). 1) Explain whether the accountant is correct (whether the $120 paid for the booking card can be recognised as revenue on 1 August 2023). If the accountant is incorrect, explain when the $120 paid for the card should be recognised as revenue and why. (You need to give reasons and explain in your own words) 2) [6 marks] Prepare the journal entry/s required by TOPCHEF Ltd to account for the above on 1 August 2023. (Hint: Please ensure that all account titles used clearly indicate nature of account. I.e., whether asset, liability, revenue or expense.) [3 marks]

Answer rating: 100% (QA)

1 Explanation of Revenue Recognition The recognition of revenue in this case should align with the p... View the full answer