Question

Chow Publications Inc. is a publicly traded media company focused on products for the home chef market. The company publishes a monthly magazine that can be purchased at newsstands and is available for annual subscriptions (either paper copy or digital copy). Chow Publications sells annual subscriptions for S50 (paper copies) or $40 (digital copies). Subscriptions are paid in advance and are non-cancellable. Chow sold for cash 1 15,000 subscriptions on December 1, 2020, of which 30% were digital subscriptions. Single issues can be purchased on newsstands. Chow Publications uses various magazine distributors across Canada to rack it at newsstands, charging the newstands $5 per copy Normally 25,000 copies are sent out each month, with 15% of these being returned unsold. Of the 25,000 magazines sent out in December 2020, all were sold on account, and none of the returned magazines are expected to be resold and, as a result, are sent to recycling. Unsold nagazines are returned by newstands in the following month. Required a. Determine how much revenue Chow Publications would be able to recognize in December 2020. Use the five-step model for revenuc recognition in preparing your responsc. Round the per magazine price to three decimal places. ic. S4.965 b. Prepare the required summary journal entries for the contract based on your analysis in part "a."

Answer 1

Answer:

IFRS 15:Under the revised IFRS on revenue recognition, A 5 step model is developed to recognized the revenue from sale of goods or supplying the services to customer. According to this IFRS revenue should be recognized by satisfying the fallowing instances in any transaction:

(1) Identifying the contract with customer: It means both the parties with the contract (seller and buyer both) are agreed for the contract and both are known about their rights and obligation in the contracts.

(2) Identifying performance obligation in contract: Again it means seller know what the performance obligation to be satisfy from his side and buyer also r know his obligation to be performed under the contract and such obligation are viable and clearly visible. in above contract, seller know that he has to deliver the content of magazine (either in paper form or digital form) and buyer also know the price for such goods. so it is clearly visible and viable. So 115000 subscription received and these are:

80500 for paper form and 34500 for digital form. Apart from that

25000 copied are sold out at news stands.

(3) Determine the transaction Price: It is also known and pre- decided in the contract, annual subscription rate, i.e. $50(for paper copy) and $40( for digital copy). further $ 5 for copy sold at news Stands.

(4)Allocation of transaction price to performance obligation: it means calculating the revenue from the transaction by applying the rate to the quantum of performance obligation.Total revenue is:$ 5,75,416.67.

(5) Recognized the revenue in the books: When the risk and rewards relating to ownership of the goods has been passed and customer is satisfied means there is no uncertainty regarding the creation of performance obligation on buyer( as he has accepted the risk and reward relating to ownership of the goods/service) then revenue should be recognized in the books.

Total revenue: Online Subscription: Paper form Digital Form Amount 335,416.67 115,000.00 450,416.67 Copies at News Stand $ 125,000.00 125,000.00 575,416.67 Required Journel Ent Cash a/c To Revenue from sale 575,416.67 575,416.67 Monthly Share in annual rate: Annual rate Paper form Digital rate $50 $40 Monthly Rate $4.17 $3.33 Distribution of Subscription Total Received Paper Form(70%) Digital form(30%) 115000 80500 34500

Thanks.