ACCA FA · Guided practice (Show me how)
Chapter 19: Accounting Conventions and Policies
Novak - a settlement discount expected to be taken
Novak sells goods on credit to 2 customers on the same day. Each order has a list price of $6,000.
He offers both customers a 4% discount if they pay within 7 days. On past experience he expects both of them to take it.
Amara pays within the 7 days. Bede does not, and pays the following month.
Novak follows IFRS 15: when a prompt payment discount is offered, the revenue recognised takes into account the probability of the discount being accepted. If the customer is expected to accept it, the revenue is recorded net of the discount.
(a) Recognition
State the amount at which Novak records each of the two sales on the day of sale, and the effect on revenue when Amara pays within the 7 days.
(b) Bede pays late
Prepare the journal entry Novak records when Bede pays the following month.
Opening this exercise…