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Hello Mike could you please help me out with this
Scubas revenue includes cash sale of $6m that it made on return basis ,cost of these goods sold are $8m.entity expects on the basis of past experience that one third of these goods will be returned to the entity by the costumer after the year end 30 sept 2014.entity will provide the refund amount to the costumer after the year end 30 sept 2014.entity will provide the refund amount to the costumer in the early days of next accounting period .the entity uses ifrs 15 and there is no evidence of decrease in the value of the inventory.please help me with how to treat this adjustment
Thank youFirst, it would be an unusual situation where the sale is for $6 million and the cost of the sale is $8 million
Are you sure that you have given me the true facts per the question
I don’t see the relevance of the $8 million
Goods sold on sale or return are not, in fact, sold. They remain the property of the seller even though possession has changed hands
So we should reverse the entry that was recorded on the sale:
Dr Revenue $6 million
Cr Liabilities $6 millionand bring the goods back into inventory
Increase inventory on the statement of financial position
Decrease cost of goods sold in the statement of profit or lossand I still don’t understand the significance of the $8 million
I’m not sure that that has helped but I’m working with limited information
If you can give me an exam reference for the question I could possibly look it up at source
Sorry Mike the cost of goods sold are $4.8m
I’m really sorry,just a day left for exam right so a bit you know ?Mike here the total revenue in the tb is $213,500 and the cost if sales is $136,800 .now as per the adjustment after considering the goods sold in return basis the revenue will be $211,500 and the cost of sales $135,518.please correct me if I’m wrong
Thank you mike ?You don’t tell me whether any of that $6 million has been sold before the year end but, assuming that none is sold, revenue should fall by $6,000,000 down to $207,500,000 and cost of sales should fall by $4,800,000 down to $132,000,000
OK?
And I still don’t understand the significance of the $8 million!
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