Question
RRR Company sells servers. A server is a piece of computer hardware or software that provides functionality for other programs or devices, called clients1 You,
RRR Company sells servers. A server is a piece of computer hardware or software that
provides functionality for other programs or devices, called clients1
You, Tony Kani, have been hired as a full-time accountant, reporting to the controller of
RRR Company, Marin Saviolini, and are excited to prove yourself by demonstrating your
competence acquired during your undergraduate Bachelor of Commerce degree at York
University and your 2021 summer internship.
RRR Company has adopted IFRS for financial reporting purposes but is not a public
company. The company is owned by Ratish Harmoni, the original founder and two friends
Meryl Gold and Yukari Sulim. The senior management team does not consist of any of the
owners. The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) both have their
compensation tied by company performance since they are awarded a bonus based on non
consolidated financial statement results. If revenues exceed a $30M threshold each
financial year, a bonus payout is computed and paid out. The draft financial statements
reflect revenues at $37.7M. Therefore, the CEO and CFO are looking forward to receiving
their 10% bonus for the December 31, 2021, yearend.
RRR Companys total debt at yearend is $750,000 at an annual interest rate of 8%.
It is now January 14, 2022, and the 2021 yearend financial statements are being finalized.
You have settled into your new role and the controller asked you to analyze transactions,
discuss financial reporting treatment and provide journal entries for several issues and
summarize in a professional report. All the information you require for your analysis has
been provided in an email received by the controller below.
In addition, a large storage unit with a book value of $800,000 is being replaced by RRR. Originally it was built using high-quality glass which both prevents sun damage and avoids reflections on the items within the unit. It has been used for several years to store servers at the appropriate temperature. RRR is seeking a buyer so that the unit can be sold and moved out of RRR to make room for the new unit which is scheduled to be delivered within the next three months. The servers are temporarily being stored in an alternate location which is deemed safe for the inventory. The new unit has been quoted to RRR at $700,000. The old unit has been advertised for sale at $600,000. Costs of dismantling are estimated to be $100,000. The buyer will pay for shipping, customization (if required) and installation as required by the buyer.
I want to know:
-
Journal entries and explanation for this question
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