Question 1

Elendril Sdn Bhd (ESB) has been in business of importing and selling office equipment to the local customers in Sabah since 2000. The following is some of the business transactions that require you to advise ESB with regards to the appropriate accounting treatment by referring to the prevailing concepts and standards especially MFRS15:

Case 1:

On 31 December 2019, ESB signed agreement with its corporate customer to supply goods worth RM30,000. Both parties agreed that ESB will deliver it on 3 Jan 2020, and the customer will pay in full on the same day. On top of that, ESB received RM5,000 as a non-refundable deposits on 31 Dec 2019. The customer has the right to cancel the order at any time as long the ESBs performance obligation is fully not fulfilled.

Case 2:

On 1 June 2019, ESB entered a contract to supply goods which in the form of package which include a set of computer (RM10,000), computer table (RM5,000) and setup (2,000). The customer paid RM2,000 as down payment. For some good reasons for which both parties understand well, until 31 Dec 2019, ESB has not yet delivered any part of the goods to its customer.

Case 3:

On 15 Dec 2019, ESB received an order to supply 40 units of printers worth RM500 each (equals to RM20,000 in total). Up to 31 Dec 2019, ESB has only managed to deliver 30 units of the ordered printers. One of the clauses in the contract agreement states that if ESB fails to deliver the printers before or on 31 Dec 2019, the customer has the right to cancel the order for the undelivered goods.

Case 4:

On 20 Dec 2019, ESB signed a contract to supply computers worth RM15,OO0 before 31 Dec 2019 to its loyal customer. The customer paid the whole RM15,000 on the signing day. However, until 31 Dec 2019 ESB has completely failed to deliver the promised goods to its loyal customer. In their contract, the customer has the right to cancel the deal if ESB fails to perform its obligation to deliver as stated in the agreement.

Case 5:

On 26 Dec 2019, ESB signed a contract with its new customer to supply service for computer training without the details of payment terms and amount. The customer already paid RM2,000 as the down payment. ESB had performed the service fully on 30 Dec 2019 but still unsure of the agreed full price to be charged to its customer. The customer for now is at unknown location and cannot be contacted.

Case 6:

On 28 Dec 2019, ESB sold goods worth RM8,000 to Ali, its very loyal customer, on credit terms. Ali has the right to cancel or return the sold goods in full or partial within a week from the purchased date. At the closing business hour on 31 Dec 2019, Ali has not made any returns.

Required:

a. In Case 3, say that ESB managed to deliver computer only on 31 December 2019, would you recognize any revenue? At what amount?

b. In case 4, say the customer cancel the order on 31 Dec 2019. What would be the appropriate accounting treatment (1) on 20 Dec 2019; and (2) on 31 Dec 2019?

d. In Case 5, say that by 31 Dec 2019 ESB is now can determine that the fair value for the service is RM17,000. ESB also has an information from the third party that the said customer is on holiday with the family and will be back sometime in January2020. Would you recognize any revenue on 31 Dec 2019? At what amount?

e. In Case 6, say that Ali only returned all goods on 2 Jan 2020 for some acceptable reasons. Would you recognize any revenue on 31 Dec 2019? At what amount?

f. In Case 3, say that the contract says that ESB still has the control over the computer, and the full responsibility for anything happens on the sent computer. Would you recognize any revenue on 31 Dec 2019? At what amount?