Wood Delights Ltd (WDL), which is a reporting entity, manufactures office furniture. The management of WDL is concerned about a downturn in the company's business. Sales have been falling and the company is facing liquidity problems. Management is worried that these factors may mean that shareholders are unhappy with the company's dividend policy and management bonuses tied to reported profits will not be paid this year. To try to alleviate these problems, WDL enters into an enforceable contract with Castor Ltd. The cost of the inventory to WDL was $ 1 200 000 but its fair value at the time of transaction (signing the contract) was

$ 1 280 000.

However, WDL and Castor Ltd have agreed to a selling price of $ 1 310 000 for this inventory, and Castor Ltd agrees to make full payment immediately upon signing the contract. It is also agreed that WDL will not physically transfer the inventory from its ware house to Castor Ltd, as Castor Ltd has no suitable storage facilities.

Required

1. Explain the five-step model adopted by AASB 15 for recognising revenue. (4 Marks)

1. Applying AASB15, when should WDL recognise revenue from this contract? Explain. (4 Marks)

1. What general journal entry should WDL recognise when cash is received, at the time of signing the contract? (2 Marks)