S Ltd, a technology equipment supply company, entered into a contract with a customer on 1 December
Question:
S Ltd, a technology equipment supply company, entered into a contract with a customer on 1 December 2017 to supply, install and service a system of computers. The agreed price was ‚€200,000, to include a two-year service contract. The payment was made in total following installation in January 2018. On 31 December 2017, S had supplied all the machines but had not yet installed any. Installation happened in January 2018. The directors of S estimated that the computers wouldbe sold for €150,000 on a stand-alone basis. Installation would cost €20,000, and the two-year servicecontract would cost €50,000 if purchased separately.
Required:
Advice, showing relevant journal entries, how the above transaction should be recognized in S Ltd financial statements for years ended 31 December 2017 and 2018?
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts