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IFRS 15 – question 4. Venue BPP practice and revision kit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › IFRS 15 – question 4. Venue BPP practice and revision kit

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • March 6, 2018 at 5:45 am #440513
    teyeeern
    Participant
    • Topics: 3
    • Replies: 1
    • ☆

    On 1 July 20×4, Venue entered into a contract with Reven for sale of a plant for 500k USD. The contract included a call option that gave Venue the right to repurchase the plant for 550k USD on or before 30 June 20×4
    Discuss how the transaction would affec the FS at 31 July 20×4.

    My journal entry:
    Dr Interest 50,000
    Dr Cash 500,000
    Cr Reven (Liability) 550,000

    If option lapsed
    Dr Financial liability 550,000
    Cr Plant 500,000
    Cr Interest 50,000

    Revenue go to OCI.

    May I know the accounting entries stated is correct?

    Thank you for your attention and patient

    March 7, 2018 at 9:47 am #440926
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7171
    • ☆☆☆☆☆

    Hi,

    Initially we cannot recognise any revenue as no control has passed so we would:

    DR Bank 500,000
    CR Financial liability 500,000

    Interest is then charged as follows:

    DR Finance cost 50,000
    CR Financial liability 50,000

    If the option then lapses then we do the following:

    DR Financial liability 550,000
    CR Revenue 550,000

    Hope that helps.

    Thanks

  • Author
    Posts
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