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A company is a retailer of washing machines/ the company sells 100 washing mashines for $500 each. each deal includes one year’s free credit , valued at $25 per machine.
free credit is treated interest income in financial statement. i dont know why? this is a kaplan question. page no. 307.
what is free credit and why it is treated as interest income?
Free credit is where a customer is given a credit period before which they need to pay for the washing machine but they are not charged for that credit period – therefore it’s called free credit
Why is it recognised? because IAS 18 says it should be – it satisfies the criteria listed on the previous page
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