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Lecture Example 1-3 Questions - Revenue

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12 views3 pages

Lecture Example 1-3 Questions - Revenue

Uploaded by

Masibonge Tukuse
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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LECTURE EXAMPLE 1

Identifying separate performance obligations

PART A
XYZ Ltd runs a shop which specialises in the sale of bicycles and their related components. The shop
buys and sells different bicycle parts to general public. The shop has recently also started to assemble
and sells fully built-up bicycles. A typical bicycle is made up of the following separate parts:
 A frame
 A pair of wheels
 A pair of pedals
 A set of brakes
XYZ entered into the following transactions:
1) XYZ combines the above parts into a package and sells them to Mr D. Mr purchases the package,
collect the bicycle parts and takes them home, where he combines the different parts which he
purchased into a bicycle. He then rides the bicycles.
2) Mr E purchases a fully built bicycles from XYZ. XYZ takes a package of bicycle parts and assembles
the bicycles. Mr E then collects the fully built up bicycles and takes it home, where he rides the
bicycle.

PART B

ABC Ltd is a supermarket which specialises in the sale of fruit and vegetables. The company made the
following sales of the following products:
3) The following fruit is sold separately by ABC –their selling prices of the different fruit also included:
a) Apple: R3
b) Banana: R2
c) Nectarine: R4
d) Mango: R9
A customer buys one item of each of the fruit and pays the total price of R18 for them.

4) ABC takes one item of each of the above four fruit and pre-packs them into a plastic bag to form a
fruit combo. ABC sells the fruit combo at R15 per combo. A customer buys the combo and pays the
price of R15 for it.
5) ABC takes one item of each of the above four fruit and makes them into a fruit salad. ABC sells the
fruit salad at R15 per fruit salad. A customer buys the fruit salad and pays the price of R15 for it.

Required

Identify the separate performance obligation for each of the scenarios above (no 1 to 5).

Revenue
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LECTURE EXAMPLE 2

Determine the transaction price: Discounts

Trade discount

An entity sells inventory to a customer for R50,000. The entity offers their customers a trade discount of
5% for cash purchases. No discount is offered for credit purchases. The inventory is delivered to the
customer immediately upon sale to him.

Required
Prepare the journal entries necessary to account for the sale of the inventory 1 to the customer for each of
the following different situations:
1) The customer purchases the inventory for cash.
2) The customer purchases the inventory on credit.

Settlement discount

An entity sold inventory to a customer for R50,000 on credit. The inventory was delivered to the
customer on 1 April 2017. The customer qualifies for a settlement discount of 5% if she pays within 30
days. The entity expects the customer to pay within 30 days.

Required
Prepare the journal entries necessary to account for the sale of the inventory to the customer (including
the related payment by the customer) in each of the following different situations:
3) The customer pays the amount due for the inventory on 20 April 2017.
4) The customer pays the amount due for the inventory on 13 May 2017.

1
Whenever required to account for the sale of a product to a customer, you should include both the delivery of the product and
the receipt of the purchase consideration. Unless specified otherwise, this principle applies to all other references to a sale.
Revenue
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LECTURE EXAMPLE 3

Determine the transaction price

Significant financing component

Example 1

An entity sells inventory to a customer for R1,000. The inventory was delivered to the customer on the
date of sale. Payment for the inventory is only due after two years. Customer payment is only due in 2
years’ time. A fair rate of interest is considered to be 12% p.a.

Required
a) What is the transaction price?

Example 2

An entity sells inventory to a customer for R1,000. The customer pays for the inventory on the date of
sale. The inventory will only be delivered to the customer two years after the date of sale. A fair rate of
interest is considered to be 12% p.a.

Required
a) What is the transaction price?

Revenue
Page 3 of 3

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