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Thank you for trying to make me understand but due to my lack of ability, I am still not clear with the concept and shall deeply appreciate your help
Based on above understanding especially illustration 1 noted above, I went ahead and tried solving (additional) break even point for Activity 5 in the BPP text. Here the question says the product are sold in ratio of 3 : 4 : 5.
I calculated B.E.Revenue as 2,103,231. I then allocated it to individual product in ratio of revenue mix (405:660:1100) and got individual products revenue. Then I divided this individual product revenue by revenue per unit and got individual B.E.P as 2914 & 3886 & 4857.
I tried to verify this B.E.P of individual product through alternative approach. I got average contribution per mix as 81.4917, so dividing Fixed cost of 950,000 by avg contribution, I received B.E.P (mix) = 11658. Now according to the logic of ratio and mix being given in question, ideally B.E.P for individual products should be B.E.P (mix) muliplied by individual ratio but instead I notice that here again, the B.E.P is arrived by dividing the mix by ratio.
Totally confusing..
Thank you Sir..Much appreciated..
Happy Teachers Day to you and all my teachers from Open Tuition…
Have a blessed lifeThank you for your prompt reply and I sincerely appreciate the same. God bless you and team Open Tuition.
I could understand that the total consideration paid is for entire Net assets and hence considered as Business Combination. However in the question, it is specifically asked as which assets should be recognized and hence I am confused with their answer to include both of them.
Sorry for my lack of understanding but specific to above case, isnt measurement one of the fundamental conceptual charecteristic for any asset recognition? If customer list cannot be reliably measured, how can it be recognized?
So if simillar question comes in exam as single option selection, what should be the answer?
I am still struggling with understanding the logic behind working the fraction. I understood that we got 3/2 by using formula Issue post bonus / issue pre bonus.
However why do we have to work out the fraction based on post bonus issue and pre bonus issue. Doesnt the allocation by month itself provide weighted averages for calculation of EPS given an understanding that Bonus component is already built within the existing shares on date of issue.
I am totally lost at understanding the underlying logic of fraction calculation and shall appreciate if you can help widen my understanding of this basic concepts?
Thank you and appreciate your time and efforts in making replies to students like me.
I am still not clear with respect to part a) related to exam preparation question 1.
Draft retained earnings as at 31st december 20X7 is provided and the issue was made on 1st January 20X8. In relation to issuance cost it is simply stated that $200,000 of direct costs related to the issue were incurred and charged to P&L. So I am still not clear why the amount needs to be added instead of reducing it from the retained earnings…Please help me in understanding this part.
Thank you for your confirmation…
God Bless you and your lectures were indeed great help
Dear Sir,
Thank you for such a nice explanation to the topic. I however have some clarity to seek on example 1 related to mobile handset and subscription revenue recognition. The period of obligation is 12 months. Suppose the customer takes the scheme on 1st of November. So effectively he has subscription of 2 months for current year and 10 months for next year. $50 per month effectively amounts to Rs 100 collected in year 1.
My question is and please correct my understanding (if it is incorrect) that since handset is already provided to customer, we records sale of handset of $ 214 on 1st November and make a receivables entry of simillar amount. As and when customer pays the $50 monthly, we apportion the amounts in ratio arrived of 35.7% towards handset receivable and 66% towards monthly service cost as income.
Is the above understanding correct??