FAF

Tutorial 3

Questions 1(a)

i. Revenue is recognized when service are provided. Deposit is treated as
liability (revenue received in advance) until the services are provided.

ii. When the outcome of the construction contract can be estimated reliably,
revenue and cost should be recognized by reference to the stage of
completion method

iii. Revenue is recognized based on the games or matches played during the
year.

iv. The entrance fees and a lump sum membership fees can be collected over
the average period the member will enjoy the clubs facilities.

Alternatively, the entrance fee may be credited as income in the year they are
received.

Questions 1(b)

i. It is a bill (sale) and holds transaction in which delivery delayed at the
buyers request but the item is identified, ready for delivery and the buyer
takes title and accepts billing. The significant risks have been passed to the
buyer. Thus, revenue of RM6600 can be recognized in Dec 2009.

ii. Malacca Traders should only recognized the revenue from the sale of the
antique when the customer takes delivery upon full payment being made
when the significant risk and rewards has been transferred to the customer.

iii. Assuming that the gadget has been delivered to the customer i.e. the
significant risk and rewards of the ownership have been transferred to the
customer, revenue of RM5000 can be recognized at the point of delivery
even though full payment is not made.

iv. Commission (fee received) can only be recognized as revenue when loan
arrangement is finalized the services have been provided i.e. 6 April 10.

v. Revenue is recognized when the decoration services are provided or 28
March 2010. Therefore, the receipt of RM200000 should be recognized as
deferred income (liability) in the statement of financial position.





Questions 2

Tweed sold a holiday resort to Conquest but Tweed remains operating the
properly will be reverted back to Tweed at the end of 10 years. Tweed still has
control over the use of the asset and benefits that brings.

The significant risks and rewards of ownership of the asset are not transferred to
Conquest. The transaction is in substance a financing arrangement not a sale
transaction.

In Tweeds books, RM200 million should not be recognized as revenue but
should be treated as interest expenses and capital repayment.

Questions 3

RM000
Sales made for the year to 31 December 2008 100000
Sales value of timber flooring fitted in two months to 28 Feb 2008 5000
Revenue to be recognized for the year ended 31 December 2008 105000


Questions 4

RM
Invoice price of machinery 800000
(-) Trade Discount 120000
680000
Insurance on shipment 10000
Import duties and taxes 600000
Delivery Costs 100000
Installation Costs 20000
Testing of machinery by producing 15000
Dismantling and restoring the building site 20000
1440000