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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) 550,000If option lapsed
Dr Financial liability 550,000
Cr Plant 500,000
Cr Interest 50,000Revenue go to OCI.
May I know the accounting entries stated is correct?
Thank you for your attention and patient
Hi,
Initially we cannot recognise any revenue as no control has passed so we would:
DR Bank 500,000
CR Financial liability 500,000Interest is then charged as follows:
DR Finance cost 50,000
CR Financial liability 50,000If the option then lapses then we do the following:
DR Financial liability 550,000
CR Revenue 550,000Hope that helps.
Thanks
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