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Hi Sir,
I haven’t understood the difference in Illustration 1 and Illustration 2 of OT notes (Pg 78).
Why is illustration 2 is considered as a modified contract, if the original 60 products sold will be reduced by the amount of the $15 credit note per product separately?
If illustration 2 was a modified contract, then why Illustration 1 wasn’t a modification contract and calculated as :
New selling price = ($100 x 60 original products to be sold) + ($90 x 30 additional units to be sold) / 90 products to be sold
(being the same concept as Illustration 2)?I can’t see the difference between them.
Can you please assist?
Thanks and regards,
MaryliseHi,
They are both scenarios where the contracts are separate. The issue with the second one is that the price of the new items sold is not reflective of the stand along price as it is now being sold at $80 and not $100, so the contract is terminated and a new one started. In the first one the price reflects the stand alone price as it is reasonably close to the original $100.
Hope that helps.
Thanks
Dear sir
In BPP revision kit group question 2(8) about revenue recognition. The new contract price is $950 which is quite close to initial price $1000.
Why in the revision book, the contract treatment is still terminatation of the existing contract and creation of a new contract? As the two price are still close rather than the difference between 100 and 80.
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