Adam Ltd. sells product at a price of $1,200,000, including a one-year warranty guarantee that the product was free of defects. The cost of the product is $960,000 and the estimated cost to provide warranty service is $10,000, based on Adam Ltd. past practice on the warranty service. In addition, Adam Ltd. sold extended warranties related to the products for an extra charge of $16,000.

Required:

Explain how should the revenue be recognized with reference to HKFRS 15 Revenue from Contracts with Customers? Journal entries are not required for the above transaction.