- September 20, 2018 at 11:40 am #475381sky1743Member
- Topics: 10
- Replies: 2
Could you please help me to understand accounting treatment of the following case:
ABC Company Limited, a chocolate manufacturing company, is offering a promotion whereby a customer who purchases two chocolate boxes in a single transaction from a store receives a free chocolate box.
The price of this bundle offer (three chocolate boxes) is $20. Standalone selling price of a chocolate box is $10. The manufacturing cost of a chocolate box is $5.
At present, the company recognises S20 as revenue, $10 as cost of sales and $5 as marketing expense for a bundle offer.
What is the correct accounting treatment related to the cost of free chocolate box in the bundle offer?
a) Cost of sales
b) Marketing expense
c) Netting off revenue
Thanks in advance. Appreciate your time and effort.
MymoonSeptember 23, 2018 at 9:23 pm #475600P2-D2Keymaster
- Topics: 4
- Replies: 6440
You have to work out the selling price based upon the standalone selling prices. The manufacturing cost is then recognised in cost of sales.
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