Question 2 Piccacio Cleaning Services provides room cleaning arrangements for ho

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Question 2 Piccacio Cleaning Services provides room cleaning arrangements for hotels. On 1 April 2015. Dorset Hotels & Resorts signed an agreement to outsource its room cleaning functions to Picacio. The contract specifies the service fee to be $15.000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Piccacio will receive an additional quarterly bonus of $3.00o, if during that quarter, Dorset receives no more than five complaints from customers about room cleanliness. tag ",m3 On 1 April 2015, based on historical experience, Piocacio estimated that there is chance that it will earn the quarterly bonus. 75% On 5 May 2015, Picacio learned that, during March 2015, there were two complaints fronm customers related to room cleanliness. Based on this new information, Piccacio revised its estimate downward to40% that it would earn the quarterly bonus. On 30 June 2015, Dorset notified Piccacio that, for the quarter ended, there were four complaints associated with room cleanliness, so Piccacio would receive the bonus. Two days later, Piccacio received al including the bonus. "l payments due for all services rendered in the second quarter, Piccacio bases estimates of variable consideration on the expected value of the consideration it expects to receive. Required: In accordance with HKFRS 15 Revenue from Contract with Customers, prepare for Piccacio (a) the 30 April 20 (b) the 31 May 2015 journal entry to record the revenue earned in May 2015, as well as entry to account for the revenue earned in April; (5 marks) any appropriate adjustments to the revenue earned in April 2015; and (6 marks) the 30 June 2015 and 2 July 2015 journal entries to record additional service revenu earned, as well as any necessary adjustments to revenue and receipt of payment from Dorset (c) (9 marks)

Explanation / Answer

Journal Entries :

Require-ments Date Accounts Titles and explanations Debit $ Credit $ a Ap 30 '15 Accounts Receivables 15000 Fees revenue 15000 (being april month fees received) Ap 30 '15 Accounts Receivables 2250 Bonus Revenue 2250 (being 75% chances to receive quarterly bonus booked) b May 30, 15 Accounts Receivables 15000 Sales Revenues 15000 (being may month fees received) May 31, 15 Bonus Revenues 1050 Accounts Receivables 1050 (being the quarterly bonus receiving expectation reduced to 40% so adjustment made) c Jun 30. 15 Accounts Receivables 15000 Sales Revenues 15000 (being June month fees received) Jun 30, 15 Accounts Receivables 1800 Bonus Revenues 1800 (being 100% receiving the quarterly bonus expectations, so adjustment made 3000 - 1200=1800 ) July 2, 15 Cash 48000 Accounts Receivables 48000 (being all fees payment received )

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