Question
QUESTION 16 (IFRS 15) (a) Ejura Ltd (Ejura) is a Manufacturing and retail company which prepares financial statements in accordance with International Financial Reporting Standards
QUESTION 16 (IFRS 15) (a) Ejura Ltd (Ejura) is a Manufacturing and retail company which prepares financial statements in accordance with International Financial Reporting Standards (IFRS) up to 31 December each year. In order to generate or improve sales on one of its older products, Ejura offered a promotion named something for free. The promotion included free maintenance services for the first two years. On 1 October 2019, under the promotional offer, Ejura sold goods to a supermarket chain for GH4.4 million. A two-year maintenance contract would normally be sold for GH0.5 million, and the list price of the product would normally be GH5 million. The transaction has been included in revenue at GH4.4 million. Required: In accordance with IFRS 15: Revenue from Contracts with Customers, justify the appropriate accounting treatment for the above transaction in the financial statements of Ejura for the year ended 31 December 2019. (b) Marshall Ltd (Marshall) is a manufacturing company that prepares Financial Statements in compliance with IFRSs and has a reporting date to 31 December. During the year to 31 December 2020, Marshall entered into a contract with a customer to manufacture and sell some goods such that the goods will be delivered (control of the goods vests with the customer) in two years. The contract has two payment options: i) The customer can pay GH500,000 when the contract is signed or ii) GH650,000 in two years when the customer gains control of the goods. Marshall's incremental borrowing rate is 10%. The customer paid GH500,000 on 1 January 2020, when the contract was signed. Marshall intends to recognise revenue on this contract in the financial statements. Required: In accordance with IFRS 15: Revenue from Contract with Customers, explain (with supporting calculations) how Marshall should account for the above transactions for years 2020 and 2021
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