Q.3.2 On 1 January 2022 (the contract date), Furniture Ltd sold R1 200 000 worth of furniture to a new housing development in Centurion. Furniture Ltd immediately credited their sales revenue with the R1 200 000. Included in the sales contract, was a complementary servicing arrangement in which Furniture Ltd would provide the customer with annual servicing of the furniture (in case of any breakages or manufacturing faults) for a period of three years from the date of the contract. The normal selling price of the furniture without any annual servicing is R1 400 000. The normal price charged to customers for annual servicing is R14 000. REQUIRED: Calculate the amount of revenue that Furniture Ltd should recognise, for the financial year end of 30 June 2022, with respect to the transaction above. Ignore the time value of money and VAT.
Q.3.2 On 1 January 2022 (the contract date), Furniture Ltd sold R1 200 000 worth of furniture to a new housing development in Centurion. Furniture Ltd immediately credited their sales revenue with the R1 200 000. Included in the sales contract, was a complementary servicing arrangement in which Furniture Ltd would provide the customer with annual servicing of the furniture (in case of any breakages or manufacturing faults) for a period of three years from the date of the contract. The normal selling price of the furniture without any annual servicing is R1 400 000. The normal price charged to customers for annual servicing is R14 000. REQUIRED: Calculate the amount of revenue that Furniture Ltd should recognise, for the financial year end of 30 June 2022, with respect to the transaction above. Ignore the time value of money and VAT.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Q.3.2
On 1 January 2022 (the contract date), Furniture Ltd sold R1 200 000 worth of
furniture to a new housing development in Centurion. Furniture Ltd immediately
credited their sales revenue with the R1 200 000. Included in the sales contract, was
a complementary servicing arrangement in which Furniture Ltd would provide the
customer with annual servicing of the furniture (in case of any breakages or
manufacturing faults) for a period of three years from the date of the contract.
The normal selling price of the furniture without any annual servicing is R1 400 000.
The normal price charged to customers for annual servicing is R14 000.
REQUIRED:
Calculate the amount of revenue that Furniture Ltd should recognise, for the
financial year end of 30 June 2022, with respect to the transaction above.
Ignore the time value of money and VAT.
|||
Expert Solution
Step 1
Aa per IFRS 115, Revenue Recognition
In a contract if their are two or more performance obligations then the contract price is to be allocated to each performance obligation on basis of their standalone selling price.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education