Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Case Study 2 - Alharam Company sells Alumtal doors and windows. In addition providing accessories, installation and maintenance services. Alharam Company performed the following revenue

image text in transcribed
image text in transcribed
Case Study 2 - Alharam Company sells Alumtal doors and windows. In addition providing accessories, installation and maintenance services. Alharam Company performed the following revenue transactions during 2019: a- Al Mohaned Co. enters into a contract with Alharam Co. to purchase 600 doors during 2019. The doors are priced at $5000 each (with a cost of $3500 each), and Alharam Co. provides a 5% volume discount if Al Mohaned Co. purchases at least 450 machines. Based on prior experience with the transactions with Al Mohaned Co., the Co. will meet the discount threshold. On March 25, 2019, Alharam Co. sold and delivered 200 machines to Al Mohaned Co. and recorded sales net. On May 8, 2019 Alharam Co, received the payment from Al Mohaned Co. (assume Al Mohaned Co. fails to meet the discount threshold). b- Alharam Company offers contract BV601, which is comprised of a free-standing window plus maintenance service for one year to a customer for a total price $3000. On a standalone basis, the window sells for $4000 (cost $2600), and Alharam Co. estimates that the standalone selling price of the maintenance service is $1000. Note that maintenance service can be performed by other companies. On June 20, 2019, Alharam Co. signed BV601 contract and delivered a window to Alfahd Co. The customer paid the contract price in cash on the same date. On December, 31 2019, maintenance service is performed. C-On October 1, 2019, Alharam sold and delivered 3 doors to a builder for 40,000. The builder plans to install it in one of its "Parade of Homes" houses. Alharam accepted a 5-year, zero- interest bearing note with face amount of $53,240. The doors have 7 an inventory cost of $25,500. An interest rate of 10% is an appropriate market rate of interest for this customer. Instructions: 1- Apply the five steps of revenue recognition process for the previous transactions, write your answer in a table as follows: write your answer in a table as follows: (3 marks) Transaction Step1: Step 2: Step3: Step 4: Steps: number Identify the Identify the Determine Allocate the Recognize contract with separate the transaction price to the revenue when customers. performance transaction separate each performance obligations in price performance obligation obligations is satisfied (a) (b) (c) the contract 2- Prepare the needed entries to record the previous transactions in Alharam books during 2019. (9 marks). 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Kermit D. Larson, Paul B. W. Miller

5th Edition

0256091935, 978-0256091939

More Books

Students also viewed these Accounting questions

Question

=+What does this say for the future of the business case for CSR?

Answered: 1 week ago