Question

On May 1, 2020, Vaughn Inc. entered into a contract to deliver one of its specialty mowers to Kickapoo Landscaping Co. The contract requires Kickapoo to pay the contract price of $893 in advance on May 15, 2020. Kickapoo pays Vaughn on May 15, 2020, and Vaughn delivers the mower (with cost of $566) on May 31, 2020.(a) Prepare the journal entry on May 1, 2020, for Vaughn.

Answer 1

May 1, 2020 - No Entry

Step-by-step explanation:

IFRS 15 requires an entity to recognise revenue when entity transfers the goods or services to the customer.

Transfer of the mower happens on May 31, 2020, this is the date at which Revenue is recognised.

The cash is also paid on May 15, 2020, according the accruals concept, no entry must be done on May 1,2020. Only when the payment occurs should there be a record in Vaughn books.