Sir
Help please
On 1 October, 2011, the first day of the accounting period, the company sold one of its products for $10 million and included this amount
in revenue. As part of the sale agreement, the company is committed to the ongoing servicing of this product until 30 September, 2014
(i.e. three years from the date of sale). The value of this service has been included in the selling price of $10 million. The estimated cost to
the company of the servicing is $600,000 per annum and the normal gross profit margin on this type of servicing is 25%.
I am having 10 000 x 75%) - (600 x3)= 5700
5700/3 x2 =3800
Dr Rev
Cr Deferred income for 3 800
but the answer is 1600
Ask the Tutor ACCA FR
revenu
At the end of the first year, there are only two more years to defer
Cost of the service is $600,000 and gross profit is 25%, so $600,000 is 75% and revenue per year is therefore $800,000
Defer for two years = $1,600,000 to defer
Ok?
Sign in to reply to this topic.