Sun Telecom Ltd is a telecommunications provider. The company entered into a contract on 1 October 2021, under which the customer paid $730 for a handset bundled with a 200-minute talk time plan at $59 per month. The customer will pay the monthly subscription of $59 at the end of each month. 

The contract lasts for 24 months.

 Assume that the fair values of the handphone and two-year mobile service are $1,000 and $52 per month, respectively. 

Required: 

(a) Identify the respective performance obligations in this contract.

(b) How much revenue should be recognised in the 3 months ended December 2021. Show all your workings clearly in a table and round off answers to the nearest cent, where applicable. 

(c) Prepare the necessary journal entries for: (i) The inception of the contract on 1 October 2021; and (ii) The three months ended 31 December 2021. Show all your workings clearly.

Answer rating: 100% (QA)

1 performance obligation in this two performance obligation exis... View the full answer