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mini exercise
Revenue
Question 4 (sir didn’t understand the double entry, can u give me the explanation of the double entry…… plz)
It’s not a sale, it’s a secured loan
So eliminate the credit entry in revenue and credit instead a loan account
And bring the $7m back into inventory by reducing cost of sales and increasing inventory on the statement of financial position
The printed solution shows $1m interest charge – that should be 10% x $10m for half a year = $500,000
In addition the question should ask for adjustments as at 31 March, 2013. Asking for adjustments at 30 September, 2012 is plain stupid!
Saimon, maturing inventory is inventory that is completed but that now requires time for it to arrive in a saleable condition
If you’re a drinker, whisky is a good example – it takes at least three years between whisky being put in a barrel and it being ready for retail
(even if you’re not a drinker, whisky is still a good example!)
If you prefer to stay away from alcohol, then cheese is another good example – it can take 2 – 3 years between the completion of a cheese and it reaching the maturity level where t is available for sale
OK?
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