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Revenue Topic

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Revenue Topic

  • This topic has 1 reply, 2 voices, and was last updated 11 months ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • February 14, 2022 at 12:25 pm #648611
    Nguyen
    Member
    • Topics: 14
    • Replies: 13
    • ☆

    Hi tutor,

    Could you please help me with the question from the TEXT book?

    Cod Co sold goods to Eel Co on 1 January 20×2 for $200,000, payable on 31 december 20×3. Eel Co cannot return the goods. The relevant discount rate is 6%. What mount of revenue and finance income should be recognised in Cod Co’s statement of profit or loss for the year ended 31 December 20×2?

    I understand the part where we calculate the revenue. But why do we have to calculate the finance income?

    Thank you in advance.

    February 20, 2022 at 9:05 am #648946
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6445
    • ☆☆☆☆☆

    Hi,

    The initial revenue will have been recognised at the present value of the sale, so $200,000 discounted by two years at 6%. The outstanding amount, receivable due then needs to be increased to the amount due in two years via an annual recognition of finance income, as effectively the purchaser has entered into a long-term credit purchase.

    Thanks

  • Author
    Posts
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