Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Revenue recognition question
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- October 31, 2010 at 3:45 pm #45755
Can anyone help me with this question? It is from this link below.
HereFS Ltd. has entered into the following transactions/agreements in the year to 31 March 2008:
(i) Goods, which had a cost of Tk.2,000,000 were sold to wholesaler for Tk.3,500,000 on 1 June 2007. FS Ltd. has option to repurchase the goods from wholesaler at any time within the next two years. The repurchase price will be Tk.3,500,000 plus interest charged at 12% p.a. from the date of sale to the date of repurchase. It is expected that FS Ltd. will repurchase the goods.
(ii) FS Ltd. owns the rights to a fast food franchise. On 1 April 2007 it sold the right to open a new outlet to Mr. Chowdhury. The franchise is for five years. FS Ltd. received an initial fee of Tk.5,000,000 for the first year and will receive Tk.500,000 p.a. thereafter. FS Ltd. has continuing service obligations on its franchise for advertising and product development that amount to approximately Tk.800,000 p.a. per franchise outlet. A reasonable profit margin on the provision of the continuing services is deemed to be 20% of revenue received.
(iii) On 1 September 2007 FS Ltd. received total subscriptions in advance of Tk.24,000,000. The subscriptions are for 24 monthly publications of a magazine produced by FS Ltd., At the year end FS Ltd. had produced and dispatched six of the 24 publications. The total cost of producing the magazine is estimated at Tk.19,200,000 with each publication costing a broadly similar amount.
Required:
Describe how FS Ltd. should treat each of the above examples in its financial statements in the year to 31 March 2008.November 1, 2010 at 11:11 am #70003I do not know where to find the solution.
November 1, 2010 at 5:29 pm #70004so where did you find the question?
November 1, 2010 at 6:56 pm #70005November 2, 2010 at 5:24 pm #70006ok , let’s go back to basics! This is clearly a past exam from an examining body. Do we know which examining body? Where did you find this exam? If we can find the examining body, we can then think about finding the solutions!
I simply do not have time to read through and start thinking about questions about which I am not familiar :(((
November 3, 2010 at 10:01 am #70007I managed to google some of the words and found out that the question is from ICAB (The Institute of Chartered Accountants of Bangladesh). It is the past year question for Professional Examination – Level II (Nov-Dec. 2008) – Advance Financial Accounting [Question 1 part (c)] but no solution is given in their website.
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