Question

Skysong Inc., a registered broker, enters into a finder’s fee agreement with HOM Homes Ltd. on June 15, 2020. Skysong will find leads in the form of buyers potentially interested in purchasing HOM’s real estate holdings. Along with finding potential buyers, Skysong helps negotiate the selling price and provides advice on contract details. If and when HOM closes a sale, Skysong will be paid within 30 days of the closing date, based on the following formula: 5% of any transaction value up to and including $1 million, plus 4% of any transaction value greater than $1 million and less than and including $2 million, plus 3% of any transaction value greater than $2 million and less than and including $3 million, plus 2% of any transaction value greater than $3 million and less than and including $4 million, plus 1% of any transaction value in excess of $4 million. If Skysong is represented by another broker and this information is not shared with HOM, the fee is reduced by 50%. On September 1, 2020, HOM paid Skysong $57,000 to provide some needed cash flow for seeking out buyers. On October 15, 2020, an offer was made and accepted for a parcel of real estate at a price of $3.65 million. The transaction closed on November 1, 2020, and Skysong was paid the finder’s fee net of $57,000 on November 30, 2020.

Determine the accounting treatment of the above events for Skysong Inc. and prepare any journal entries needed on:

June 15, 2020

September 1, 2020

October 15, 2020

November 1, 2020

November 30, 2020

Answer 1

Most Important point and only important Point is Brokerage Calculation :

As per Question , it is being mentioned that final accepted price $ 3.65 Mio

Basis of Slab	Brokerage Calculation
	Amount	%	Commission
1000000	10,00,000	5%	50,000
2000000-1000000	10,00,000	4%	40,000
3000000-2000000	10,00,000	3%	30,000
3.65*1000000-3000000	6,50,000	2%	13,000
			1,33,000

Journal Entries
June15'20	No JE - Entered into Transaction
Sept1'20		Debit($)	Credit($)
HOM paid money to	Bank A/c	57000
Skysong	Advance received Money		57000
Oct15'20	No JE - Only offer and acceptance has been completed
Nov30'20
Final Settlement Entries
	Advance received Money	57000
	Bank A/c	76,000
	Brokerage Account		1,33,000
	( Final Settlement entry )