Question

nue Recognition (15 December 31. HDR signs up talented pop, rock, and country music singers to its record label and then produces and sells music CD's. Haffa Dolla Records (HDR) is a small Canadian record label that uses IFRS. Its fiscal year end is HDR signed a contract for open air concerts with the Ontario Music Association (OMA) in 2020. Uk will be paid $200,000 for each concert, with payment received two months ahead of the concert. This $200,000 price includes the concert itself plus an immediate transfer of 10,000 of HDR's CD's to OMA. OMA will sell these CD's for $i5 each at the concerts, which is the retail pice for the CD. HDR's cost is only $5 ner CD This is not a consignment arrangement but OMA kes legal ownership of the CD's before each concert. The market price for an open air concert alone I. Open air concerts is $100,000. II. Home-studio recording system HDR has designed a home-studio recording system. After extensive testing, it is ready to be sold to consumers. Based on HDR's market research, typical customers will be in low income- brackets and will not be able to afford the $10,000 system price. Therefore, HDR will provide customers the option to purchase these systems with monthly installment payments over 10 months, with the first payment due two months after the purchase date. Each system costs HDR $6,500. Required: a) For I, provide journal entries for HDR for the first open-air concert in 2020, both at the time of payment receipt and at the time of the concert. Show computation in good format for partial marks. b) For II, provide journal entries for HDR to record its first installment sale to a customer as well as the first monthly payment received from the customer.

Answer 1

200000 200000 Cash Alc ....... Dr To customer Advance /uncaroed Revenucal face To recognize prepayment of future sales servica] 200000 100000 50 000 Customer Advance lunearned Revenue Alc To concert services To sales Alc To patents (copy rights All [To record revenue carned ] 50000 - 200000 prepayment Reccived (-) CD's to be sold 50000 150000 10000 (-) Market value of concert - Copyrights of co's byged by OMA 50000

10000 6 500 Installment Accounts Receivable To Inventory All To Deffered goods profit 3500 [To record and recognize Installment sale] 1000 Cash Alc To Installment 1000 accounts receivable [-To record 1st Installment received] Deffered gross profit m 350 cost of goods sold 650 sales revenue Alc [to recognize the reveaue on sale] 1000 Notas - sale price 10000 COGS 6500 (65%) (35%) Gross profit. 3500 Gristalment = 10000 = 1000$ per Installment COGS 650 [ 1000 x 65% per Installment GP - 350 [1000 x 35%) per Installment.