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(i) Sandown’s revenue includes $16 million for goods sold to Pending on 1 October
2008. The terms of the sale are that Sandown will incur ongoing service and support
costs of $1.2 million per annum for three years after the sale. The service
performance obligation will be satisfied over time. Sandown normally makes a gross
profit of 40% on such servicing and support work. Ignore the time value of money.->
Revenue decrease by 4,000 (because revenue not earned is obligation)
CL increase 2,000
LTL increase 2,000(we decrease revenue because 4,000 is included in the revenue which is not earned; if that is the case then even the COS should be adjusted because COS of 2,400 for 4,000 revenue should have been included in COS.)
Pls explain sir.
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