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An entity has transferred 60 products out of a 120-product contract at ₹1,000 each. The contract is then modified to add 30 more products at ₹950 each, reflecting their standalone selling price at the modification date. The modification is accounted for as:
AA separate contract for the 30 additional products at ₹950 each, with no impact on the original contract's accounting
BA cumulative catch-up adjustment, with revenue on remaining 60 + 30 products at a blended rate
CA termination of the old contract and creation of a new one for the remaining 60 + 30 products at a blended price
DA reduction in revenue already recognised on the 60 products already delivered
Answer & Solution
Correct answer: A. A separate contract for the 30 additional products at ₹950 each, with no impact on the original contract's accounting
Both conditions of para 20 are met: (i) the 30 additional products are distinct from the original 120, and (ii) the ₹950 price reflects standalone selling price at the modification date. Therefore the modification is a SEPARATE contract — the original 120-product contract's accounting continues unaffected, and the 30 new products are recognised independently as they are delivered.
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