1. Morisot plc supplies mobile phones and network services to retail customers. On 1^st July 2019 it launched its latest model of handset, the Artwork 5. As a promotional offer, customers can sign a three-year contract which provides a free handset at the beginning of the period. The customer then pays 25 per month for unlimited calls, texts and data.

The handsets can be purchased separately for 648 and the monthly plan without the handset is available for 18 per month.

Gurpreet signed a contract on 1^st January 2020.

Requirement

Calculate how much revenue Morisot plc should recognise with respect to Gurpreets contract in the year ending 30^th June 2020. (5 marks)

2. Morisot plc owns a piece of freehold land that it had been using for parking vehicles. However, in order to fund a new strategic development, the directors decided on 18^th June to dispose of the land as it was the only way funds could be raised. The land is carried on the Statement of financial position at the original cost of 60,000 at 30^th June 2020. The directors have appointed an agent to market the property on the companys behalf. This agent has advised the fair value of the land is 85,000 and is advertising the land at this price. The agent expects in the current market that the sale will be completed within a month. The selling costs are expected to amount to 2% of selling price.

Requirement

Explain, with the aid of calculations, how the transaction should be accounted for in the year ending 30^th June 2020