Exam (elaborations)
FAC3764/ FINANCIAL ACCOUNTING ASSESSMENT 01 SOLUTIONS
- Institution
- University Of South Africa (Unisa)
THIS DOCUMENT CONTAINS SOLUTIONS FOR FAC3764/ FINANCIAL ACCOUNTING ASSIGNMENT 01 SEMESTER 01
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NAME:STUDENT NUMBER:
MODULE CODE: FAC3764
SUBJECT:
ASSIGNMENT NUMBER:
a) Discussion of recognition and measurement of transactions.
1.1For revenue to be cognise it must meet the following steps as per IFRS 15:
Identify the contract with a customer; there is a valid contract between DD
Armoured Ltd and S4G LTD with effect 1 August 20x21, where DD
Armoured Ltd must deliver 10 armoured vehicles and S4G LTD must pay
DD Armoured Ltd.
Identify the separate performance obligations in the contract; DD
Armoured Ltd has promised in a contract to transfer to S4G LTD 10
armoured vehicles (goods that are distinct) and the 120 000km service
plan option (series of distinct service). The transaction price is R985 000
per vehicle, which is gives a total of R9 850 000.
Determine the transaction price; the amount of consideration that DD
Armoured expects to be entitled in exchange for transferring promised
vehicles and a service plan is R9 850 000 +r375 000 (10 vehicles x
R37 500 service plan price) = R10 225 000 in the current financial period.
, Allocate the transaction price.
PRODUCT REVENUE TO CALCULATIONS
RECOGNISE
R 9700 0000
x R 9 850 000
10 armoured vehicles R9 344 254.28 R10 225 000
R 375 000
x R 480 000
Service plan for 10 R17 603.91 R 10 225 000
vehicles
Therefore, total revenue to recognise: R9 344 254.28 + R17 603.91 =
R9 361 858.19
Recognise revenue when the performance obligation is satisfied;
successfully DD Armoured transferred the legal ownership of 10 vehicles
on 1 November 20x21, and S4G LTD made the payment price was also
paid on this date. However, these Vehicles are subjected to service as
they have undergone the 15 000 km service during the current financial
year.
Therefore, DD Armoured must recognise revenue on 1 November 20x21
(at a point in time), the date on which control over vehicles was transferred
to S4G LTD and it is must reported in the Statement of Comprehensive
Income as R9 361858.19
1.2 Revenue recognition model must be meet.
Identify the contract with a customer; a legal contract between DD Armour
Ltd & SEAL Protection Ltd was agreed on (on 1 February 20x22), for the
exchange of 5 custom-made armoured vehicles and the customer must
pay a cost of R1 350 000 per vehicle. However, the contact is cancellable
provided that SEAL Protection Ltd will pay DD Armoured Ltd for the work
performed.
Identify the separate performance obligations in the contract; DD
Armoured is now obliged to design & deliver five custom-made armoured
vehicles (distinct product) and these vehicles are specific and cannot be
sold to another customer but to SEAL Protection. On the date of
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