Home › CA Final › financialreporting › variableconsideration › An entity sells 1,000 units at ₹50 each (cost ₹3…
An entity sells 1,000 units at ₹50 each (cost ₹30 each); customers may return any unused product within 30 days. The entity expects 30 units to be returned and 970 to be kept. Cost of recovery is immaterial. Under Ind AS 115, at point of sale the entity recognises:
ARevenue ₹48,500 + a refund liability ₹1,500 + cost of sales ₹30,000
BRevenue ₹50,000 + an inventory writedown ₹1,500
CRevenue ₹50,000 + a contingent return provision ₹1,500
DRevenue ₹48,500 + a refund liability ₹1,500 + an asset (right to recover) ₹900
Answer & Solution
Correct answer: D. Revenue ₹48,500 + a refund liability ₹1,500 + an asset (right to recover) ₹900
Para B21 — revenue is recognised only on the 970 units NOT expected to be returned (970 × ₹50 = ₹48,500). A refund liability is recognised for the ₹50 × 30 = ₹1,500 the entity does not expect to keep. A right-to-recover asset is recognised at the former carrying amount of the products expected back (₹30 × 30 = ₹900), separately from the refund liability.
Related questions
Under Ind AS 115, if the fair value of non-cash consideration (e.g., shares) received fromAn entity sells 10 units of a product at ₹100 each. The customer can return any unit but iA customer purchases a PREPAID mobile-services card where the customer decides WHEN to useA construction contractor enters a 3-year contract with milestone-based progress payments.Under Ind AS 115, an entity may NOT need to adjust the transaction price for the time valuNKT Ltd. sells a product for ₹1,21,000 payable 24 months after delivery. Control passes atAn entity sells a computer with a 90-day ASSURANCE warranty (built into the basic transactAn asset-manager contract pays a 2% quarterly management fee on AUM PLUS a 20% performance