QUESTION 2

PUMAX sport is a listed company in Bursa Malaysia. The fiscal year 2019 (January 1, 2019 - December 31, 2019) has been great for PUMAX. Net income is higher than expected. On February 1, 2020, PUMAX received RM480,000 from a client, Sportmax, for a two-year sales contract. In the contract, PUMAX agreed to deliver sports products amounting to RM20,000 per month to Sportmax. As of December 31, 2020, PUMAX had successfully delivered the product as per the contract with no product return.

i). Prepare the journal entry for the transaction on February 1, 2020. (3 marks)

ii). Calculate the revenue related to the mentioned contract that should be recognised for the fiscal year 2020. (4 marks)

iii).Prepare the adjusting journal entry on December 31, 2020. (3 marks)

iv).COVID19 pandemic has affected the business and caused a significant decrease in PUMAXs profit for 2020. Thus, as an accountant of the company, top management requested you to capture RM480,000 in revenue account for the fiscal year 2020 because full payment had been received on February 1, 2020. As a professional accountant, what will be your response to the top management regarding the request? Provide four (4) reasons for your answers. (10 marks)