ExpertHard2 marksMultiple Choice
ACCA · Question 07 · Recording transactions and events
Global Wholesale Distributors offers a 10% trade discount for bulk orders and a 5% settlement discount if payment is made within 14 days. A customer places a bulk order with a list price of $10,000. It is highly probable the customer will take the settlement discount. At what amount should the initial revenue be recorded?
Global Wholesale Distributors offers a 10% trade discount for bulk orders and a 5% settlement discount if payment is made within 14 days. A customer places a bulk order with a list price of $10,000. It is highly probable the customer will take the settlement discount. At what amount should the initial revenue be recorded?
Answer options:
A.
$10,000
B.
$9,000
C.
$8,550
D.
$8,500
How to approach this question
Apply the trade discount first. Then, under IFRS 15, if a settlement discount is expected to be taken, deduct it from the revenue at the point of sale.
Full Answer
C.$8,550✓ Correct
First, deduct the trade discount: $10,000 - 10% = $9,000. Under IFRS 15, variable consideration (like a settlement discount) is estimated at inception. Since it is highly probable the customer will take it, deduct 5% of $9,000 ($450). Revenue = $9,000 - $450 = $8,550.
Common mistakes
Adding the percentages together (15%) and applying it to the list price.
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