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Use the following information to answer questions 1 and 2.

On September 1, 20X5, SST Ltd. sold a new all-in-one printer to Millennium Co. for a total contract price of $5,300. The printer has a market value of $3,400. As part of the contract, SST always provides on-site installation and training when a customer purchases a printer; customers would not be able to obtain the installation service from other suppliers. SST estimates that the fair value of the installation service is $200. The contract payment also includes a three-year maintenance service agreement. SST also sells the maintenance service separately for $1,800. The printer was delivered and installed on September 15, 20X5. As part of the agreement, SST agrees to the following payment terms from Millennium: September 1, 20X5 $4,100 September 1, 20X6 $600 September 1, 20X7 $600 SST has determined that the credit risk rate associated with Millennium is 8%.

1. Which of the following statements is true for SST when recording the transaction on September 15, 20X5, on the income statement?

a) Revenue increased by $3,255.

b) Revenue increased by $3,400.

c) Revenue increased by $3,447.

d) Revenue increased by $3,600.

2. SST has a December 31 year end. Which of the following credit entries in 20X5 regarding the sales contract with Millennium is correct?

a) CR interest revenue by $28

b) CR interest revenue by $32

c) CR interest revenue by $86

d) CR interest revenue by $96

3. Which of the following situations correctly uses IFRSs to record revenue?

a) North Co. offers rebates of 2% to South Co. if South purchases at least 40,000 units in a year. In the first quarter of the year, North sells 15,000 units to South at a sales price of $220,000, and records revenue in this amount. In prior years, North sold over 40,000 units to South.

b) On January 12, 20X6, TCT Inc. shipped merchandise with a retail value of $25,000 on consignment to Avian Store. TCT recorded sales revenue of $25,000 with cost of goods sold of $18,000 for the transaction.

c) Construction Ltd. enters into a contract with a customer to build an office building for $2,000,000, with a performance bonus of $200,000 if the building is ready by July 1, 20X7. The contract requirements are similar to contracts that Construction has performed previously, and management estimates that there is a 70% probability that the contract will be completed by July 1, 20X7. Given the uncertainty, management didn't include the bonus in the total transaction price.

d) Lang Co. sold 100 units to Trung Co. on account for a selling price of $14,500. Lang grants the right to return products that do not sell in the four months following delivery. Past experience indicates that the normal return rate is 12%. When Trung returned five products, Lang recorded a debit to refund liability for $725.

4. May Ltd. estimates its allowance for doubtful accounts using the year-end aging of accounts receivable. Information for fiscal year 20X5 follows:

Allowance for doubtful accounts at December 31, 20X4 $13,000

Uncollectible accounts written off during 20X5 6,600

Uncollectible accounts recovered during 20X5 3,800

Credit sales 12,840,000

May has the following accounts receivable balances as at December 31, 20X5, including a breakdown of the percentage estimated by management to be uncollectible:

Balance % estimated to be uncollectible

0-30 days outstanding $299,600 1%

31-60 days outstanding 85,600 5%

61-90 days outstanding 30,400 20%

Over 90 days outstanding 12,400 50%

What should May's bad debt expense be for the year ended December 31, 20X5?

a) $3,756

b) $6,556

c) $9,356

d) $19,556

5. B&B Co. has a credit balance of $200,000 in its allowance for doubtful accounts (AFDA) account on January 1, 20X6. During 20X6, B&B estimates bad debt expense to be 0.5% of net credit sales. Sales for 20X6 were $20,000,000. Sales returns and allowances were $350,000, and 90% of the net sales were on account. During 20X6, uncollectible accounts receivable of $120,000 were written off. Accounts receivable has a debit balance of $1,470,000 on December 31, 20X6. What is the AFDA balance on December 31, 20X6?

a) $168,425

b) $170,000

c) $178,250

d) $180,000