Reference no: EM132589759

An entity enters into a contract with the customers to sell an asset. control of the asset will transfer to the customer to two years. the contract includes two alternative payment options: payment of 5,000 in two years when the customers obtains control of the asset or payment of 4,000 when the contract is signed. The customers elects to pay 4,000 when the contract is signed. the entity concludes that the contract contains a significant financing component because of the length of time between when the customers pays for the asset and when the entity transfers the asset to the customer, as well as the prevailing interest rates in the market. The interests rate implicit in the transaction is 11.8 per cent, which is the interest rate necessary equivalent. however, the entity determines that, in accordance with PFRS 15, the rate that should be used in adjusting the promised consideration is six per cent, which is the entity's borrowing rate.

Requirement:

Question 1: Provide all the journal entries during the contractual period