Dragons Fire Pty Ltd enters into three contracts in the same week with Red Hot...
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Accounting
Dragons Fire Pty Ltd enters into three contracts in the same week with Red Hot Equipment Pty Ltd who have agreed to pay the total of $726 000 (GST inclusive). Red Hot Equipment Pty Ltd pay the total in full on 7 August 2021. The details for the three contracts are as follows:
Date of Contract
Description
Contract Price (GST Exc)
Stand Alone Selling Price (GST Exc)
1/1/2021
Construction of Outdoor wood heaters. Completed by 31/07/2021
$600,000
$320,000
3/1/2021
Renovation of existing wood heaters owned by the client. Completed by 15/08/2021
$20,000
$140,000
5/1/2021
Construction of new model of wood heater to be used inside. Completed by 30/08/2021
$40,000
$200,000
Required:
With reference to AASB 15. Apply the five-step process for revenue recognition in regards to the contract with Red Hot Equipment Pty Ltd. Discuss how Dragons Fire shall recognise the revenue from the contract. Please list each of the five steps and show any calculations.
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