Section B - Case 1: NovaGrid (Question 1 of 5)
Scenario: NovaGrid, a telecom infrastructure company, entered into a contract on 1 January 20X5 to build a specialized network for a client and maintain it for 2 years. The total contract price is $1,200,000. If sold separately, the network build would cost $1,000,000 and the 2-year maintenance would cost $400,000. The network was completed and handed over on 31 December 20X5.
Additionally, NovaGrid leased a specialized crane on 1 January 20X5 for 3 years. Payments are $50,000 annually in arrears. The implicit interest rate is 5%. (PV of $1 annuity for 3 yrs at 5% = 2.723).
Question: Under IFRS 15, how much of the total transaction price should be allocated to the network build performance obligation?
ACCA · Question 17 · Revenue from Contracts with Customers
Section B - Case 1: NovaGrid (Question 2 of 5)
Scenario: NovaGrid, a telecom infrastructure company, entered into a contract on 1 January 20X5 to build a specialized network for a client and maintain it for 2 years. The total contract price is $1,200,000. If sold separately, the network build would cost $1,000,000 and the 2-year maintenance would cost $400,000. The network was completed and handed over on 31 December 20X5.
Additionally, NovaGrid leased a specialized crane on 1 January 20X5 for 3 years. Payments are $50,000 annually in arrears. The implicit interest rate is 5%. (PV of $1 annuity for 3 yrs at 5% = 2.723).
Question: Assuming the maintenance service begins immediately upon handover on 31 December 20X5, how much revenue in total should NovaGrid recognize in its Statement of Profit or Loss for the year ended 31 December 20X5?
Answer options:
$1,028,571
$857,143
$1,200,000
$1,000,000
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