Accounting for IFRS, under the new revenue recognition principle IFRS 15
(Existence of a Contract) On January 1, 2014, Gordon Co. enters into a contract to sell a customer a wiring base and shelving unit that sits on the base in exchange or $3,000. The contract requires delivery of the base first but states that payment for the base will not be made until the shelving unit is delivered. Gordon identifies two performance obligations and allocates $1,200 of the transaction price to the wiring base and the remainder to the shelving unit. The cost of the wiring base is $700; the shelves have a cost of $320.
Instructions
(a) Prepare the journal entry on January 1, 2014, for Gordon.
(b) Prepare the journal entry on February 5, 2014, for Gordon when the wiring base is delivered to the customer.
(c) Prepare the journal entry on February 25, 2014, for Gordon when the shelving unit is delivered to the customer and Gordon receives full payment.