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Revenue includes a $3 million sale made on 1 jan 2015 of maturing goods which are not biolovical 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 $5million.The repuchase price will be the original selling price plus interest at 10% per annum from the date of sale to the date of repurchase.
This is treated as a loan in substance in the solution. Can you please explain me how this transaction will affect the cash flow staement.Is it financing or investing?
last time you explained it and i saw it on the post but my question is about its double entry
debit cash
credit revenueso it is financing arrangement and
debit cash-3000
credit loan note-3000debit finance cost-300
credit loan-300is this the below entry right?
debit inventory-2000
credit-cost of sales-2000“is this the below entry right?
debit inventory-2000
credit-cost of sales-2000”Yes
We always used to say that “Inventory is its own double entry” because when we increase inventory, it reduces cost of sales and therefore increases profits and, at the same time, it increases current assets
So whatever figure you put in for inventory, so long as everything else is correctly double entered, the statement of financial position will balance
Whatever figure you put in
$5,792,863?
The statement of financial position will balance
$562?
The statement of financial position will balance
$5,198,724,792,863?
The statement of financial position will balance
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