Sulf Inc. sells accounting software for a price of $20,000. To make the sale more attractive, Sulf Inc. offers to sell the software inclusive of a three-year service contract for $27,000. A comparable service contract is sold separately for $12,000.

A customer approached Sulf Inc. with respect to the sale. A contract was signed on January 1,2021 and the customer paid Sulf Inc. cash.

Required:

Assess the five steps for revenue recognition and determine when the performance obligation is complete (8 marks)

Provide journal entry or entries to record the sale of the software and service contract on January 1, 2021 and any adjusting entry on December 31, 2021 (i.e. the companys fiscal year)

(4 marks}

PART B (8 MARKS)

Marina Construction Company uses the percentage-of-completion method of accounting. In 2020, the company began work on a government contract, which had a contract price of $4,000,000 and estimated costs of $3,000,000. Additional data were as follows:

	2020	2021
Costs incurred this year	$600,000	$2,550,000
Estimated cost to complete as of 12/31/2020	2,400,000	-0-
Billings during the year	720,000	3,080,000
Collections during the year	500,000	3,100,000

Required: Calculate the gross profit to be recognized by Marina Construction Company during 2020.