On January 27, 2010, Lock Company Entered into a Three-Year

question 100

Essay

On January 27, 2010, Lock Company entered into a three-year agreement with Strong Enterprises to supply 2,000 ounces of platinum for $200 an ounce. During 2010, Lock mined and purified the 2,000 ounces of platinum at a cost of $200,000. The platinum was shipped on January 14, 2011 and arrived on January 15, 2011, at Strong's warehouse. What is Lock's revenue and gross profit recognized during 2010, consistent with the criteria for revenue recognition and the matching concept? Explain.

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Definitions:

Historical Pattern

Trends or sequences in data that have been observed to repeat over historical periods, often used for forecasting and analysis.

Warranty Claims

Requests made by customers for the repair or replacement of products under the terms of a warranty agreement.

AASB 137

The Australian Accounting Standards Board standard that deals with Provisions, Contingent Liabilities, and Contingent Assets.

Provisions

Liabilities of uncertain timing or amount, recorded to account for future obligations or potential losses.