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Hello,
1) On 1 October 20X6, RoPo Co entered into a mobile phone contract consisting of a phone handset plus 12 months’ airtime. The customer will pay a monthly fee of $60. The standalone selling prices of the handset and airtime were $300 and $600 respectively.2) On 1 July 20X6, RoPo Co sold goods for $7,497. The contract allows the customer two years’ interest free credit. RoPo Co’s cost of capital is 5%.
the answer is:
handset revenue = ($60×12) × 300/900 = $240.00
airtime revenue = ($720 – $240) × 3/12 = $120.00
the total revenue recognised = $360.00the question is :
1) where is the revenue of selling prices to be recognized ? it is not included in the answer, only the fee has been recognized?
2) for the handset revenue, it is recognized the revenue of 12 months, whilst the accruing period is only 3 months from October to December, other than the Airtime it is correctly treated ?
3)Why number 2 is not recognized, and what is meant by “two years’ interest free credit”?Thanks
Where’s this question from?
The total to be received from this contract is 12 x $60
RoPo Co will not receive the $300 + $600 – that’s why it’s not recognised
Only $720 will be received and that is allocated as to $240 for the handset and $480 for the airtime
The handset is a one-off sale and the sale took place on 1 October. The revenue from a one-off transaction like this is recognised in the accounting period in which it takes place
I’d like to see the question before I tackle number 2
2 years’ interest free credit is … exactly what it says! The customer does not have to pay anything for two years and the seller will not charge any interest on the amount outstanding during that period
OK, this is the head of the question (the question is from BECKER MOCK ONE ) :
RoPo Co has entered into a number of revenue based contracts during the year ended 31 December 20X6. The following information relating to three contracts is shown below:Ok, i found number 2 is not requested at the question.
which of following statements would indicate that a performance obligation is satisfied over a period of time?
(1) RoPo Co’s performance does not create an asset with an alternative use to RoPo Co
(2) The customer has significant risks and rewards of ownership of the asset
A 1 only
B 2 only
C Both 1 and 2
D Neither 1 nor 2the answer is A
the answer is not clear , what does the statement mean ?A performance obligation is an obligation where the seller is undertaking to render a performance over a period of time
Think of a seller providing a machine and an undertaking to maintain that machine for 3 years
The performance to be rendered by RoBo Co is directly connected to the handset sale and cannot be separated from it
Airtime cannot be sold as a separate matter – it can only be sold because of the handset
OK?
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