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City Motors Ltd. Sold a Car to its Customer for $ 1,663,750. on 1st of July.,10 term provided that the Whole Amount Should be Paid After 3 Years. Effective Rate of interest is 10% . what amount of revenue should be recognised at end of year 1,2 n 3 ?????? answer plzzzzzzzzzz
The customer could have bought a whole fleet of cars for that much! What is it – a gold plated Pope-mobile?
You don’t give me any information about original cost / profit element so, in the absence of possibly complete information, I’m going to go this way……
$1,663,750 discounted for three years at 10% comes to the beautiful figure of $1,250,000.
So I’m going to suggest Dr Receivables, Cr Revenue $1,250,000
Then, at end year 1, unroll the discount Dr Receivables Cr Finance Income $125,000
In year 2 the same entry but for $137,500 and in year 3, the same again but for $151,250
ok?
so there’ll be no entry for revenue account for year 2 n 3 …………….. right ????? ………
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