Page 174 - F2 Integrated Workbook STUDENT 2019
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Chapter 7
Example 7.2
On 1 January 20X1, Gross Net, a payroll service provider, enters into a two
year contract with a customer. The contract price is $1 million. In addition, the
customer will pay Gross Net a $0.2 million bonus if the number of errors made
by Gross Net falls below a set threshold.
Discuss the accounting treatment of the above in the year ended
31 December 20X1 assuming that:
Gross Net has little experience with this type of work and is unsure
whether the bonus target will be achieved.
Gross Net has extensive experience with this type of work and
considers it highly likely that the bonus target will be achieved.
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