ABC Inc, a telecommunications operator, entered into a contract with Mr. X on March 1, 20x2. In line with the contract, Mr. X will subscribe to ABC Inc's monthly plan for 12 months and in return Mr. X receives a free cellphone from ABC Inc. Mr. X will pay a monthly fee of P5,000. Mr. X will get immediately the handset after the contract signing. ABC Inc sells the same handset for P26,000 and the same monthly plan for P3,250 per month without the handset. Determine the revenue to recognized by H Inc. on April 30, 20x7. [A] 27,000 [B] 5,000 [C] 3,250 [D] 3,000

ABC Inc, a telecommunications operator, entered into a contract with Mr. X on March 1, 20x2. In line with the contract, Mr. X will subscribe to ABC Inc's monthly plan for 12 months and in return Mr. X receives a free cellphone from ABC Inc. Mr. X will pay a monthly fee of P5,000. Mr. X will get immediately the handset after the contract signing. ABC Inc sells the same handset for P26,000 and the same monthly plan for P3,250 per month without the handset. Determine the revenue to recognized by H Inc. on April 30, 20x7. [A] 27,000 [B] 5,000 [C] 3,250 [D] 3,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 7C: On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial...

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On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
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