ExpertMedium2 marksMultiple Choice
ACCA · Question 05 · Recording transactions and events
Section A
Oceanic Logistics provides shipping services. They issue an invoice for $10,000 to a client. Oceanic offers a 5% trade discount to this client, and an additional 2% early settlement discount if payment is made within 10 days. Oceanic expects the client to take the early settlement discount.
At what amount should Oceanic Logistics initially record the revenue?
Section A
Oceanic Logistics provides shipping services. They issue an invoice for $10,000 to a client. Oceanic offers a 5% trade discount to this client, and an additional 2% early settlement discount if payment is made within 10 days. Oceanic expects the client to take the early settlement discount.
At what amount should Oceanic Logistics initially record the revenue?
Answer options:
A.
$10,000
B.
$9,500
C.
$9,310
D.
$9,300
How to approach this question
First, deduct the trade discount. Then, because the settlement discount is expected to be taken, deduct it from the post-trade discount balance to find the initial revenue figure under IFRS 15.
Full Answer
C.$9,310✓ Correct
Under IFRS 15, revenue is recorded net of trade discounts and expected settlement discounts. Initial amount: $10,000. Less 5% trade discount ($500) = $9,500. Less 2% expected settlement discount on $9,500 ($190) = $9,310.
Common mistakes
Calculating the settlement discount on the gross $10,000 instead of the $9,500 subtotal.
Practice the full ACCA FA — Financial Accounting Practice Exam 1
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