Case Study $1$

Amal Company sells machines. In addition providing accessories, installation and

maintenance services. Amal Company performed the following revenue transactions during

$2022$:

a$-$ Omar Co$.$ enters into a contract with Amal Co$.$ to purchase $500$ machines during $2022.$ The

machines are priced at $$3000$ each $($with a cost of $$2500$ each$),$ and Amal provides a $6\%$ volume

discount if Omar Co$.$ purchases at least $300$ machines. Based on prior experience with the

transactions with Omar Co$.,$ the Co$.$ will meet the discount threshold. On March $17,2022,$ Amal

Co$.$ sold and delivered $200$ machines to Omar Co$.$ and recorded sales net. On May $1,2022$ Amal

Co$.$ received the payment from Omar Co$.($assume Omar Co$.$ fails to meet the discount threshold$).$

b$-$ Amal Company offers contract AZ$301,$ which is comprised of a free$-$standing machine plus

installation it to a customer for a total price $$6000.$ On a standalone basis, the machine sells for

$$5000($cost $$4000),$ and Amal Co$.$ estimates that the standalone selling price of the installation

service is $$3000.$ Note that installation service can be performed by other companies. On June $10,$

$2022,$ Amal Co$.$ signed AZ$301$ contract and delivered a machine to Alfatah Co$.$ The customer paid

the contract price in cash in the same date. On July $5,2022,$ the installation service was performed.

c$-$ On November $1,2022,$ Amal sold and delivered $4$ machines to a builder for $20,000.$ The builder

plans to install it in one of its "Parade of Homes" houses. Amal accepted a $3-$year, zero$-$interest

bearing note with face amount of $$26,620.$ The machines have an inventory cost of $$13,500.$ An

interest rate of $12\%$ is an appropriate market rate of interest for this customer.

Pag e $1|2$

Acct $372$

Case Study

$1445$

Instructions:

$1-$ Apply the five steps of revenue recognition process for the previous

transactions, write your answer in a table as follows:

$2-$ Prepare the needed entries to record the previous transactions in Amal books

during $2022.$

$3-$ Prepare income statement and statement of financial position $($for only the

sections that are affected by these transactions$)$ to reflect the effects of

previous transactions on them.