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Good day Mr Mike,
Why is the following statement not correct?
“Making a provision for a constructive obligation of $400,000; this being the sales value of goods expected to be returned by retail customers after the year end under the company´s advertised 30-day returns policy.”
Without looking at the question, is it because the amount of economic outflow is only the profit element of those returned goods? Can these goods not be taken back into inventory and sold again?
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i am puzzled as well.
Why can’t you look at the question then>>?
The outflow of economic resource is not likely going to be the sales value of the returned goods.
The only outflow will be the lost profits
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