Dec 2012- Quincy

Cost of servicing is $600,000 Profit margin is 25% so profit is $200,000 giving an invoice value for the service of $800,000 And that's for 3 years So the revenue to be recognised on the sale of the product is $10,000,000 - (3 x $800,000) = $7,600,000 I assume that the accounting year end that we're looking at is 30 September, 2012 so the first year of the three year service has now passed Therefore, in revenue for the year ended 30 September, 2012 there will be the $7,600,000 plus the first year of service revenue of $800,000 The remaining part of the $10,000,000 included in the trial balance will be shown as deferred income on the statement of financial position as at 30 September, 2012 OK?

I didn't understand the Profit margin is 25% so profit is $200,000 giving an invoice value for the service of $800,000 part How did you calculate $800,000? and what about the $600,000 Cost of servicing?

If cost of servicing is $600,000 and profit margin is 25%, then cost of service must be 75% And if $600,000 is 75%, then the 25% profit margin must be $200,000 And that gives an invoice value of $800,000 And 25% of $800,000 is $200,000 And this is F3 stuff!

Hi, I have a question about this problem. If we deduct 2 year's service price of 800*2 and indicate it as deferred revenue, what happens to the cost of this service? The way I understand it, if service price is included in revenue, probably cost of providing service also must have been included in the cost of sales. Question does not say about it openly though. The way I solved it was to reduce cost of sales too by 600*2=1200. So, I'd like to know where is a mistake in my judgement. Thanks in advance.

Hi, The cost will be recognised as the service is provided. The question doesn't state that they've recognised any costs as of yet, so no adjustment to costs would be required. Once the time elapses and the service is provided then the cost will be recognised as incurred to match against the revenue. Thanks

Hi, can you please help me with this question. For equity dividend paid, why do we multiply it with 4 in the calculation i.e, 60000*4*0.08=19200 Thanks

Hi, I've not got the question to hand but I think that the shares had a nominal value of $0.25 and so we would divide by $0.25 or multiply by 4 to get the number of shares in issue. Thanks