Question
When the project commenced (at the beginning of the financial year), Large Mart intended to sell the program to university students directly through its australia
When the project commenced (at the beginning of the financial year), Large Mart intended to sell the program to university students directly through its australia store. However, on the day the new program goes on sale, Large Mart receives an offer from university to purchase 25,000 copies of the program (on CD) for $200,000 because university would like to supply a version of the program to each student free of charge. Large Mart accepts universities offer and produces the 25,000 CDs at a production cost of $1 per CD (IMPORTANT NOTE: the cost of $1 per CD does NOT include any research or development expenditures for the program!). On the day the CDs are delivered to university, Large Mart receives the $200,000 payment for the CDs. However, the Large Mart accounting department is unsure how to calculate the Cost of Goods Sold for this sales transaction.
Question 2a) Provide a detailed discussion of the accounting requirements that Large Mart must follow to calculate the Cost of Goods Sold for the sale of the 25,000 program CDs to university (IMPORTANT NOTE: you do NOT need to show the calculations for the Cost of Goods Sold!)
University is also considering to purchase all rights to the program that was developed by Large Mart for its own exclusive use (rather than to purchase additional copies of the program for students in the future).
Question 2b) Explain how the Large Mart accounting department would have to record such a sale of all rights to the program to university, and provide a detailed discussion of any differences (if any exist) between this sale of all rights to the program to university and the sale of 25,000 individual copies of the program on CD touniversity. (IMPORTANT NOTE: you do NOT need to show any journal entries or calculations in your answer to this question)
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