ExpertMedium2 marksMultiple Choice
ACCA · Question 17 · Financial Reporting
Section B - Case 1: QuantumQ
QuantumQ provides quantum computing hardware and specialized cooling services. On 1 January 20X6, QuantumQ entered into a contract with a research lab to supply a quantum processor and 2 years of continuous cooling maintenance for a total fixed fee of $800,000. The processor and maintenance are distinct. The standalone selling price of the processor is $600,000 and the 2-year maintenance is $400,000. The processor was delivered and installed on 1 January 20X6.
How much revenue in total should QuantumQ recognize in the statement of profit or loss for the year ended 31 December 20X6?
Section B - Case 1: QuantumQ
QuantumQ provides quantum computing hardware and specialized cooling services. On 1 January 20X6, QuantumQ entered into a contract with a research lab to supply a quantum processor and 2 years of continuous cooling maintenance for a total fixed fee of $800,000. The processor and maintenance are distinct. The standalone selling price of the processor is $600,000 and the 2-year maintenance is $400,000. The processor was delivered and installed on 1 January 20X6.
How much revenue in total should QuantumQ recognize in the statement of profit or loss for the year ended 31 December 20X6?
Answer options:
A.
$480,000
B.
$640,000
C.
$800,000
D.
$560,000
How to approach this question
Add the revenue recognized at a point in time (processor) to the revenue recognized over time for the first year (maintenance).
Full Answer
B.$640,000✓ Correct
Processor revenue recognized on 1 Jan 20X6 = $480,000.
Maintenance allocated price = $800,000 - $480,000 = $320,000.
Maintenance is provided over 2 years, so 20X6 revenue = $320,000 × 1/2 = $160,000.
Total revenue for 20X6 = $480,000 + $160,000 = $640,000.
Common mistakes
Recognizing the full $320,000 maintenance revenue in the first year.
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