Icicle Inc. buys and sells photocopy equipment that are used in businesses across Ontario. The company follows IFRS. Unit selling prices range from $10,000 to $100,000.

Cicle Inc. sells a printing machine to Frosty Inc. on June 14th, 2020. The selling price for the machine is usually $120,000.

ICicle Inc. will also install the machine. The estimated fair value of installing the photocopy system is $5,000.

Icicle Inc. sold the machine and installation to Frosty Inc. for $122,000. The machine cost Icicle Inc. $58,000.

Frosty Inc. is obligated to pay Icicle Inc. $50,000 upon delivery of the machine and the balance on August 15th.

Icicle Inc. delivers the machine on July 1st, 2020, and completes the installation of the machine on July 15th, 2020.

On August 15th Frosty Inc. informs Icicle Inc. that they will be not be able to pay their account that is due. The two parties enter into an agreement that the account will be converted into a non-interest bearing promissory note to be repaid in one year from now. Frosty Inc. borrows fund at a rate of 5%. Icicle Inc. has various loans at 7% interest. The companys year end is December 31st.

i.List the performance obligations?

ii.Explain when the revenue should be recognized for each performance obligation under ASPE. Support your answer by explaining why it should be recognized at the time you selected. Hint use RCMP for criteria (6 marks)

iii.Prepare the journal entries for 2020 and 2021. If there is no entry be sure to state no entry. Hint remember to allocate the revenue among the different performance obligations and then use this information when you prepare the journal entries. In your answer do not use the discount on notes account.

iv.If the company followed IFRS when should the revenue be recognized for the sale of the machine and why? Be sure to list the criteria and apply it to the question.