QUESTION TWO $[40]$

Byte Right is a wholesale supplier of computer hard drives. Byte Right sold some hard drives to

the American branch if an international, blue$-$chip company called Terra One.

Byte Right and Terra One are long standing business partners and for that reason should Terra

One require hard drives, they are produced exclusively for Byte Right.

Byte Right and Terra One entered the following agreement:

$-$ Contract date: $22$ December $2020$

$-$ Contract price: R$2000000$

$-$ Contract obligations:

o Supply of hard drives

o Installation of the hard drives at the American branch of Terra One and

o Providing maintenance services for three years whereby Byte Right will be

expected to provide backup whenever needed.

The three$-$year maintenance programme is very popular with all Byte Right customers.

The stand$-$alone prices of the various contract components were as follows: the hard drives are

R$320000,$ the installation process is R$840000$ and the $3$ year maintenance is R$1320000.$

Delivery and installation information:

$-$ The American branch took delivery of the hard drives on the $28$th of December $2020$ but

were unable to use them until the installation team arrived at their offices to install them.

$-$ The installation team arrived and completed the installation on $9$th of January

$2021\mathrm{.}10\mathrm{.}05$

The contract price of R$2000000$ was payable by Terra One in instalments as follows:

$-$ Half the total contract price is due in $2$ equal instalments:

$3$

o On the $31$st of December $2021$

o On the $31$st of December $2022$

$-$ Byte Right offers the option to pay in instalments to all of its customers

The contract does not contain a significant financing option.

Required

$2\mathrm{.}1$ Identify the performance obligations and provide reasons to support your answer $(6)$

$2\mathrm{.}2$ Determine the transaction price with reasons $(8)$

$2\mathrm{.}3$ Determine the allocation of the transaction price $(6)$

$2\mathrm{.}4$ Show the journal entries that will be required to be processed for the years ended $31$

December $2020$ and $31$ December $2021$