Question
On 30 September 2020, Nawal BSC enters into a contract to transfer Products X and Y to a customer in exchange for BD100,000. The contract
On 30 September 2020, Nawal BSC enters into a contract to transfer Products X and Y to a customer in exchange for BD100,000. The contract requires Product X to be delivered first and states that the payment for Product X is conditional on the delivery of Product Y. Therefore, the consideration of BD100,000 is only due after Nawal BSC has transferred both Products X and Y to the customer.
Nawal BSC identifies the promises to transfer Products X and Y as separate performance obligations. On the basis of their relative stand-alone selling prices, Nawal BSC allocates BD40,000 to the performance obligation to transfer Product X and BD60,000 to the performance obligation to transfer Product Y.
On 31 December 2020, Nawal BSC transfers Product X to the customer. Nawal BSC intends to transfer Product Y to the customer on 31 March 2021.
What accounting entry should Nawal BSC make to record the transfer of Product A to its customer on 31 December 2020?
A DEBIT Trade receivable BD100,000; CREDIT Revenue BD40,000, CREDIT Contract liability BD60,000
B DEBIT Contract asset BD100,000; CREDIT Revenue BD100,000
C DEBIT Trade receivable BD40,000; CREDIT Revenue BD40,000
D DEBIT Contract asset BD40,000; CREDIT Revenue BD40,000
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