Sim STar Ltd is a telecommunications provider. On 1 January 2020, the company entered into a contract to sell a phone set and to provide two-years’ line service to a customer for $22 a month. The stand-alone selling price of the phone set and the service line is $120 and $20 respectively. Required: (a) Identify the performance obligations in this contract. (b) How much revenue should be recognised in the year ended 31 December 2020. Show all your workings clearly and round off answers to the nearest cent, where applicable. (c) Based on your answers in (b) above, prepare the necessary journal entries.
Sim STar Ltd is a telecommunications provider. On 1 January 2020, the company entered into a contract to sell a phone set and to provide two-years’ line service to a customer for $22 a month. The stand-alone selling price of the phone set and the service line is $120 and $20 respectively. Required: (a) Identify the performance obligations in this contract. (b) How much revenue should be recognised in the year ended 31 December 2020. Show all your workings clearly and round off answers to the nearest cent, where applicable. (c) Based on your answers in (b) above, prepare the necessary journal entries.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sim STar Ltd is a telecommunications provider. On 1 January 2020, the company entered into a
contract to sell a phone set and to provide two-years’ line service to a customer for $22 a month.
The stand-alone selling price of the phone set and the service line is $120 and $20 respectively.
Required:
(a) Identify the performance obligations in this contract.
(b) How much revenue should be recognised in the year ended 31 December 2020.
Show all your workings clearly and round off answers to the nearest cent, where applicable.
(c) Based on your answers in (b) above, prepare the necessary
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