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Sale Date: 31 dec x1; transfer of control date: 31 dec x1; $1m due 31 dec x3. Cost of capital: 10%.
1m/1.1^2=826446
what will be the entries on 31 dec x1 and 31 dec x2?
can please tell me.
regards
Hi,
The sale is recognised on 31 Dec X1, hence:
DR Receivable
CR Sales@ PV of the amount to be received on 31 Dec X3
The PV is then unwound at the end of each year as investment income, hence:
DR Investment income
CR Receivable@10% of the outstanding receivable each year.
Finally, once the cash is received:
DR Bank
CR ReceivableThanks
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