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Revenue includes a $3 million sale made on 1 January 2015 of maturing goods which are not biological assets.The carrying amount of these goods at the date of sale was $2 million. Moston is still in possession of the goods (but they have not been included in the inventory count) and has an unexercised option to repurchase them at any time in the next three years. In three years’ time the goods are expected to be worth $5 million. The repurchase price will be the original selling price plus interest at 10% per annum from the date of sale to the date of repurchase
Hi tutor I have a question regarding the above adjustment. Is it correct that we will deduct 2000 from the cost of sales and add it to the inventory under the current assets. Also do we add the 3000 plus interest to non current liabilities?
Thanks.Moston commenced a research and development project on 1 January 2015. It spent $1 million per month on research until 31 March 2015, at which date the project passed into the development stage. From this date it spent $1·6 million per month until the year end (30 June 2015), at which date development was completed. However, it was not until 1 May 2015 that the directors of Moston were confident that the new product would be a commercial success.
Another question. I understand that in the above statement 4600 will be charged to cost of sales. But I am confused about the treatment of the 3200? I know it will be capitalised but where will it go in the SFP?
Don’t put two separate different topics on the single thread!
The first one isn’t a sale – it’s a secured loan so we need to undo the double entry:
Dr Revenue $3,000
Cr Cash $3,000And then record the loan
Dr Cash $3,000
Cr Loan $3,000The short cut is therefore:
Dr Revenue $3,000
Cr Loan $3,000The $3,200 development costs will go into an intangible non-current asset account
OK?
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