Reference no: EM132631231

The Ovalombola Wheel is a distributor of specialised machinery owned by Liyerenge Fillipus. He is preparing the statement of profit or loss for the year ended 31 December 2006.

The entity uses the accrual basis of accounting and is considering the following unrelated events which took place during the year:

1. Signed a contract with Amasha Ltd for the sale of machinery for N$ 60 000. Machinery with a selling price of N$ 32 000 was delivered during 2006. The balance will be obtained and delivered in 2007.

2. Sold machinery for N$ 40 000 to Elimbo Ltd delivered this machinery during 2006. Payment has not yet been received.

3. Assembled machinery costing N$ 80 000 during 2006 for which a buyer has not been found. The selling price of this machinery in N$ 120 000

4. Received in advance during 2006 a partial payment of N$ 10 000 for machinery with a selling price of N$ 50 000 to be assembled and delivered to Black Ltd in 2007.

5. Received payment of N$ 78 000 during 2006 for machinery sold and delivered in the previous financial year.

Required to:

Problem 1: For each transaction, determine how much income should be recognised as earned during the financial year ended 31 December 2006. Explain the answers.