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Hi tutor the correct answer in the following question is C but I think it should be B. Can you explain why it is C when the $30,000 of this has not yet been earned and must be deferred until the servicing work has been completed
Repro, a company which sells photocopying equipment, has prepared its draft financial statements for the year ended
30 September 2014. It has included the following transactions in revenue at the stated amounts below.
Which of these has been correctly included in revenue according to IAS 18 Revenue?
A Agency sales of $250,000 on which Repro is entitled to a commission
B Sale proceeds of $20,000 for motor vehicles which were no longer required by Repro
C Sales of $150,000 on 30 September 2014. The amount invoiced to and received from the customer was
$180,000, which includes $30,000 for ongoing servicing work to be done by Repro over the next two years
D Sales of $200,000 on 1 October 2013 to an established customer which (with the agreement of Repro) will be
paid in full on 30 September 2015. Repro has a cost of capital of 10%I’m not answering this because IAS 18 is no longer in the syllabus
This is clearly a pre-IFRS 15 question and you should ignore it
However …
The answer is C because only $150,000 has been included in Revenue. The remaining $30,000 has been invoiced and received but will be shown as a current liability … because it isn’t included in revenue!
The sale proceeds of TNCA do NOT go through revenue – this is an F3 lesson!
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