Bank hf. entered into an agreement with the customer on the delivery and installation of the machine on 1 January 2020 and on carrying out a service inspection of the machine on the one hand on 1 July 2020 and on the other hand on 1 January 2021. The cost price of the machine at Bank hf. nam 80,000.

Bank hf. sells both machines and service inspections separately.

The customer is obliged according to agreements to pay Bank hf. 200,000 on January 1, 2021.

Normal payment terms in the industry are a 30-day payment deadline for machine sales and cash payment for service inspections. Terms for payment deferrals to customers for one year are now 10% interest per year for companies in this industry.

The experience of Bank hf. is that the cost of service inspections of machines of the type being sold to the customer is 15,000 for the first service inspection and 25,000 for the second service inspection. The actual cost of the service inspections is the same as the estimated cost. When Bank hf. sells service inspected separately, the mark-up for them is 50%.

January 1, 2021, the selling price of a machine of the same type is 125,964 against cash payment.

Tasks:

a) What are the contractual obligations of the sale?

b) How should the income from the contract be divided into contractual obligations?

c) Show the entries that need to be made in the accounts of Bank hf. in 2020 and 2021 due to the agreement.