JUSTINE R.

CARIQUITAN

1. Does the contract qualify for accounting under PFRS 15? State the
reason(s) for your answers.
 The contract between Entity X and the customer qualifies for PFRS 15
accounting because it has been approved by both parties, the parties'
relationship for the goods to be transferred can be identified, the contract
has a commercial substance, the payment to be received can be
identified, and the company has a reasonable expectation of receiving
the consideration.

2. What is (are) the performance obligation(s) in the contract?

 Entity X's performance obligation is a collection of unique products (lot,
constructed house, and house design) that are fundamentally the same
and have been promised to the client, as well as the same pattern of
transfer from the corporation to the customer.

3. How will Entity X satisfy the performance obligations in the contract?

 Entity X will fulfill its performance requirement by performing the following
actions: The customer will first be sold the lot. Following the lot selection
and sale, the purchaser will be asked to select a desired house design.
Following the customer's selection of a house design, construction will
begin. The Entity must complete the house building in one year,
according to the customer's specifications and the design chosen. The
performance responsibilities shall be fulfilled when the client receives the
completed and constructed house (as per the chosen design and
including any alterations made by the customer) and payment is
received.

4. How much is the transaction price in the contract?

 P6,000,000.00 is the purchase price. Because of the possibility that
failure to deliver the contract according to the specifications and any
delay in the contract's completion will influence the consideration to be
received upon completion, the transaction price is a variable
consideration.
a) Determine the nature of the transaction price (Fixed or variable) If the
transaction price includes variable consideration, determine how Entity X
should account for that variable consideration.
 When the transaction price of the contract is determined, Entity X will
account for the variable consideration by estimating the variable
consideration. When it is likely that a cumulative amount of revenue
 reversal will occur in the future owing to an unpredictable event, the
variable consideration is defined by the expected value.
b) Determine if the transaction price provides significant financing to either
the customer or Entity X.
 The transaction price provides large financing to Entity X for the
construction of the dwellings, and the payment conditions of the
consideration, that is, the consideration can be paid in monthly
installments, give significant financing to the consumer. The customer
and the corporation both benefit from these payment conditions because
they provide significant funding.

5. How should Enity X allocate the transaction price to the performance

obligation(s) in the contract?
 By establishing a stand-alone pricing for the contract, the entity will
assign the transaction price to the performance responsibilities. The
entity's overall price for the contract or the various components in the
contract is known as the stand-alone pricing. The price will be allocated
to the performance duties for Entity X based on the three performance
responsibilities (lot, home design, and constructed house).

6.  How should Enity X recognize revenue from the contracts?

 Entity X will record income as the contract is executed in the form of a
20% down payment made in monthly installments and the principal
amount when the contract is completed. As a result, as the organization
creates an asset for the customer, revenue is recognized over time.

7. Provide the journal entry on April 1, 2021

 There will be no entry because signing a contract does not necessitate an

entry. When the contract's revenues and expenditures are recognized, a
journal entry will be created.