Entity A is a Hong Kong-based limited company that has participated in the building material industry...
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Entity A is a Hong Kong-based limited company that has participated in the building material industry for many years. It sells high-quality raw materials to different local and foreign manufacturers. Entity B has been one of its loyal customers for more than 30 years. On 1 January 2022, Entity A received an advanced payment of $2,654,000 from Entity B through the Hong Kong City Bank for selling Material X. According to the contract terms, Entity A would only deliver Material X to Entity B on 31 December 2022. On 31 December 2022, the cash sale price of Material X was $2,799,970. The cost of sales of Material X was $1,235,000. On 1 January 2023, Entity A entered into another contract with Entity B. This contract stated that Entity A was required to transfer Material Y and Material Z to Entity B in exchange for $345,800. According to the contract terms, Entity A could invoice this full amount on 31 January 2023. Material Y was to be delivered on 28 February 2023 and Material Z was to be delivered on 31 March 2023. Both promise to transfer Material Y and Material Z was identified as separate performance obligations. The amount of $210,500 was allocated Material Y and $135,300 to Material Z respectively. The cost of sales of Material Y and Material Z was 65% and 55% of their sale prices respectively. Entity A received a crossed cheque from Entity B of Material Y and Material Z on 30 April 2023. The market interest rates for the years 2022 and 2023 were 5.50% and 6.50% respectively. Entity A adopts a perpetual inventory system for keeping its inventory accounting records. Entity A recognises revenue when control of each material transfers to Entity B. REQUIRED: Provide journal entries for Entity A from 1 January 2022 to 30 April 2023 under relevant accounting standards. ACCOUNTS FOR INPUT: | Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE | | Asset for product to be returned | Commission expense | Commission revenue | Revenue | | Cost of sales | Contract asset | Contract liability | Retained earnings | No entry | ANSWER: Journal Entries: Date 1-Jan-22 31-Dec-22 31-Dec-22 Account Name JUL JUL Credit (S) 000000 Hints For Sequence Entity A is a Hong Kong-based limited company that has participated in the building material industry for many years. It sells high-quality raw materials to different local and foreign manufacturers. Entity B has been one of its loyal customers for more than 30 years. On 1 January 2022, Entity A received an advanced payment of $2,654,000 from Entity B through the Hong Kong City Bank for selling Material X. According to the contract terms, Entity A would only deliver Material X to Entity B on 31 December 2022. On 31 December 2022, the cash sale price of Material X was $2,799,970. The cost of sales of Material X was $1,235,000. On 1 January 2023, Entity A entered into another contract with Entity B. This contract stated that Entity A was required to transfer Material Y and Material Z to Entity B in exchange for $345,800. According to the contract terms, Entity A could invoice this full amount on 31 January 2023. Material Y was to be delivered on 28 February 2023 and Material Z was to be delivered on 31 March 2023. Both promise to transfer Material Y and Material Z was identified as separate performance obligations. The amount of $210,500 was allocated Material Y and $135,300 to Material Z respectively. The cost of sales of Material Y and Material Z was 65% and 55% of their sale prices respectively. Entity A received a crossed cheque from Entity B of Material Y and Material Z on 30 April 2023. The market interest rates for the years 2022 and 2023 were 5.50% and 6.50% respectively. Entity A adopts a perpetual inventory system for keeping its inventory accounting records. Entity A recognises revenue when control of each material transfers to Entity B. REQUIRED: Provide journal entries for Entity A from 1 January 2022 to 30 April 2023 under relevant accounting standards. ACCOUNTS FOR INPUT: | Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE | | Asset for product to be returned | Commission expense | Commission revenue | Revenue | | Cost of sales | Contract asset | Contract liability | Retained earnings | No entry | ANSWER: Journal Entries: Date 1-Jan-22 31-Dec-22 31-Dec-22 Account Name JUL JUL Credit (S) 000000 Hints For Sequence
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Related Book For
Operations Management Processes And Supply Chains
ISBN: 9781292409863
13th Global Edition
Authors: Lee Krajewski, Naresh Malhotra, Larry Ritzman
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