Misty IT Co provides hardware, software and IT services to small business customers. Mighty IT Co has developed an accounting software package. The company offers a supply and installation service for $ 1,500 and a separate two-year technical support service for $800. Alternatively, it also offers a combined goods and services contract which includes both of these elements for $2,000. Payment for the combined contract is due one month after the date of installation. In December 20X5, Misty IT Co revalued its corporate headquarters. Prior to the revaluation, the carrying amount of the building was $3 m and it was revalued to $4.5m. Misty IT Co also revalued a sales office on the same date. The office had been purchased for $1,500,000 earlier in the year, but subsequent discovery of defects reduced its value to $1200,000. No depreciation had been charged on the sales office and any impairment loss is allowable for tax purposes. Misty IT Co's income tax rate is 30%. In accordance with IFRS 15 Revenue from Contracts with Customers, when should Misty IT Co recognise revenue from the combined goods and services contract? For each combined contract sold, what is the amount of revenue which Misty IT Co should recognise in respect of the supply and installation service in accordance with IFRS 15? In accordance with IAS 12 Income Taxes, what is the impact of the property revaluations on the income tax expense of Misty IT Co for the year ended 31 December 20X5? In January 20X6, the accountant at Misty IT Co produced the company's draft financial statements for the year ended 31 December 20X5. He then realised that he had omitted to consider deferred tax on development costs. In 20X5, development costs of $400,000 had been incurred and capitalised. Development costs are deductible in full for tax purposes in the year they are incurred. The development is still in process at 31 December 20X5. What adjustment is required in Misty IT Co's statement of profit or loss for the year ended 31 December 20X5 to account for deferred tax on the development costs?

Misty IT Co provides hardware, software and IT services to small business customers. Mighty IT Co has developed an accounting software package. The company offers a supply and installation service for $ 1,500 and a separate two-year technical support service for $800. Alternatively, it also offers a combined goods and services contract which includes both of these elements for $2,000. Payment for the combined contract is due one month after the date of installation. In December 20X5, Misty IT Co revalued its corporate headquarters. Prior to the revaluation, the carrying amount of the building was $3 m and it was revalued to $4.5m. Misty IT Co also revalued a sales office on the same date. The office had been purchased for $1,500,000 earlier in the year, but subsequent discovery of defects reduced its value to $1200,000. No depreciation had been charged on the sales office and any impairment loss is allowable for tax purposes. Misty IT Co's income tax rate is 30%. In accordance with IFRS 15 Revenue from Contracts with Customers, when should Misty IT Co recognise revenue from the combined goods and services contract? For each combined contract sold, what is the amount of revenue which Misty IT Co should recognise in respect of the supply and installation service in accordance with IFRS 15? In accordance with IAS 12 Income Taxes, what is the impact of the property revaluations on the income tax expense of Misty IT Co for the year ended 31 December 20X5? In January 20X6, the accountant at Misty IT Co produced the company's draft financial statements for the year ended 31 December 20X5. He then realised that he had omitted to consider deferred tax on development costs. In 20X5, development costs of $400,000 had been incurred and capitalised. Development costs are deductible in full for tax purposes in the year they are incurred. The development is still in process at 31 December 20X5. What adjustment is required in Misty IT Co's statement of profit or loss for the year ended 31 December 20X5 to account for deferred tax on the development costs?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 6E: Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of...

See similar textbooks