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Prominence Skyrope Sdn Bhd, a high risk cleaning service company, had the following statements prepared as December 31,2015 and 2014

Prominence Skyrope Sdn Bhd Statement of Financial Position As of December 31,2015 and 2014
	12/31/2015	12/31/2014
	RM	RM
Cash	9,000	19,000
Account receivable	65,000	52,000
Short-term investments(available for sale)	38,000	21,000
Inventory	43,000	60,000
Prepaid Rent	8,000	7,000
Equipment	157,000	133,000
Accumulated depr.- equipment	(38,000)	(28,000)
Copyrights	49,000	53,000
Total assets	331,000	317,000
Accounts Payable	43,000	45,000
Income taxes payable	7,000	9,000
Salaries and wages payable	11,000	7,000
Short-term loans payable	11,000	13,000
Long-term loans payable	63,000	61,000
Common stock, RM 10 par	103,000	103,000
Contributed capital,common stock	33,000	33,000
Retained earnings	60,000	46,000
Total Liabilities & stockholders equity	331,000	317,000

Prominence Skyrope Sdn Bhd Statement of Comprehensive Income For the year ended 31 Dec 2015 RM RM
Sales		341,150
Cost of goods sold		178,000
Gross margin		163,150
Operating expenses		120,000
Operating income		43,150
Interest expense	14,400
Gain on sale of equipment	5,000	(9,400)
Income before tax		33,750
Income tax expense		6,750
Net Income		27,000

Additional information :

1. Dividends in the amount of RM9,000 were declared and paid during 2015
2. Depreciation expense and amortization expense are included in operating expenses
3. No unrealized gains or losses have occurred on the investments during the year
4. Equipment that had a cost of RM33,000 and was 70% depreciated was sold during 2015

Required :

1. Prepare a statement a statement of cash flows using indirect method.

(20 marks)

2. Win Win Company is involved in the design, manufacture, and installation of various types of wood products for large construction projects. Win Win recently completed a large contract for Boomrz Sdn Bhd which consisted of building 35 different types of concession counters for a new soccer arena under construction. The terms of the contract are that upon completion of the counters, Boomrz would pay RM 5,000,000. Unfortunately, due to the depressed economy, the completion of the new soccer arena is now delayed. Boomrz has therefore asked Win Win to hold the counters at its manufacturing plant until the arena is completed. Boomrz acknowledges in writing that it ordered the counters and that they now have ownership. The time that Win Win Company must hold the counters is totally dependent on when the arena is completed. Because Win Win has not received additional progress payments for the arena due to the delay, Boomrz has provided a deposit of RM 3 000,000.

Required :

Explain this type of revenue recognition transaction. What factors should be considered in determining when to recognize revenue in this transaction? (5 Marks)

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