7 REVENUE RECOGNITION RENDERING OF SERVICES * On 1 February 2014, Company % entered into an agreement with Customer S to develop a new data- base system (both hardware and software) for Customer S. lhe agreement states that the total consider ation to be paid for the system will be $860000. Company 2. expects that its total costs for the system will be $670000. As the end of its reporting period. 30 June 2014. Company 2 had incurred labour costs of $130000 and materials casts of $360000. Of the materials costs. $60 000 is in respect of materials that have not yet been used on the system. Of the labour costs. $25000 is an advance payment to a subcontractor who had not performed his work on the project as at 30 June 2014. As at 30 June 2014. Cus- tomer S had made pragress payments to Company of $500 000. Company 7 has determined that IAS 11 does not apply to this transaction and calculates the percentage of completion using paragraph 24(c) of IAS 18. Required Calculate the revenue to be recognised by Company Z. for the year ended 30 June 2014 and prepare the journal entries to record the transactions described. Assume all of Company Z's costs are paid for in cash. 7 REVENUE RECOGNITION RENDERING OF SERVICES * On 1 February 2014, Company % entered into an agreement with Customer S to develop a new data- base system (both hardware and software) for Customer S. lhe agreement states that the total consider ation to be paid for the system will be $860000. Company 2. expects that its total costs for the system will be $670000. As the end of its reporting period. 30 June 2014. Company 2 had incurred labour costs of $130000 and materials casts of $360000. Of the materials costs. $60 000 is in respect of materials that have not yet been used on the system. Of the labour costs. $25000 is an advance payment to a subcontractor who had not performed his work on the project as at 30 June 2014. As at 30 June 2014. Cus- tomer S had made pragress payments to Company of $500 000. Company 7 has determined that IAS 11 does not apply to this transaction and calculates the percentage of completion using paragraph 24(c) of IAS 18. Required Calculate the revenue to be recognised by Company Z. for the year ended 30 June 2014 and prepare the journal entries to record the transactions described. Assume all of Company Z's costs are paid for in cash