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Question 1 Part A and B A. On July 1, 2018, Apache Company, a real estate...

Question 1 Part A and B

A.

On July 1, 2018, Apache Company, a real estate developer, sold a parcel of land to a construction company for $3,080,000. The book value of the land on Apache’s books was $1,320,000. Terms of the sale required a down payment of $220,000 and 13 annual payments of $220,000 plus interest at an appropriate interest rate due on each July 1 beginning in 2019.

How much revenue will Apache recognize for the sale (ignoring interest), assuming that it recognizes revenue at the point in time at which it transfers the land to the construction company? (Leave no cells blank - be certain to enter "0" wherever required.)

2018 Revenue=

2019 revenue=

B. Tulane Tires wrote a contract for a $104,000 sale to the new Garden District Tour Company. Tulane only anticipates a slightly greater than fifty percent chance that Garden will be able to pay the amounts that Tulane is entitled to receive under the contract. Upon delivery of the tires, assuming no payment has yet been made by Garden, how much revenue should Tulane recognize under U.S. IFRS?

Revenue under IFRS=

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Homework Answers

Answer #1

Ans.

Part A

In the given case, revenue is recognized at a point when the parcel of land is transferred to the construction company.

Therefore, full revenue should be recognized in 2018 because transfer of land to construction company is made in 2018.

And no revenue will be recognized in the year 2019.

2018 Revenue = $ 3,080,000

2019 revenue = $ 0

Part B

Revenue under IFRS = $ 104,000

Under IFRS, this contract would qualify for revenue recognition as “probable” is defined as a likelihood which is greater than 50%.

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