Question

Write a report about the requirement.

Requirement: Explain how to recognize the revenue if you have the information below.

Use a boldface type for important accounting terminologies or words in your report.

The A company sells copy machine at a sales price of JPY1,500,000 per unit. The sales price includes delivery and installation. It also gives a maintenance service (6 years) in which a technician checks to make sure that the machine is working properly with a price of JPY500,000 (one-time prepayment). The A company has started a promotion campaign in which the maintenance service (6 years) will be offered for free to a client that buys a copy machine of JPY 1,728,000. The A company has made a contract to sell a copy machine with the maintenance service (6 years) to B company by JPY 1,728,000.

Answer 1

Transaction	General Journal	Debit	Credit
1	Accounts Receivable	1,728,000
	Sales Revenue		1,296,000
	Unearned Service Revenue		432,000
Year-End Adjustment, If sales made at the beginning of the year
2	Unearned Service Revenue	72,000
	Service Revenue		72,000
	(432,000/6)
Note: Unearned service will be recognized as revenue every year up to 6 years
		Price	Base	Sale Price	Allocated Price
	Machine	1,500,000	15/20	1,728,000	1,296,000
	Maintenance service	500,000	5/20	1,728,000	432,000
		2,000,000			1,728,000