Exercise 5.7 REVENUE RECOGNITION - RENDERING OF SERVICES On 1 February 2014, Company Z entered into an agreement with Customer S to develop a new database system (both hardware and software) for Customer S. The agreement states that the total consideration to be paid for the system will be $860 000. Company Z expects that its total costs for the system will be $670 000. As at the end of its reporting period, 30 June 2014, Company Z had incurred labour costs of $130 000 and materials costs of $360 000. Of the materials costs, $60 000 is in respect of materials that have not yet been used on the system. Of the labour costs, $25 000 is an advance payment to a sub- contractor who had not performed his work on the project as at 30 June 2014. As at 30 June 2014 Customer S had made progress payments to Company Z of $500 000. Company Z has determined that IAS 11 does not apply to this transaction and calculates the percentage of completion using paragraph 24(c) of AASB 118. 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