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An entity sells 10 units of a product at ₹100 each. The customer can return any unit but incurs a 3% restocking fee (₹3 per returned unit). The entity expects 1 unit to be returned. Under Ind AS 115, revenue recognised at point of transfer is:
A₹897 — 9 units × ₹100 minus the ₹3 restocking fee on the expected return
B₹1,000 — full revenue with a contingent return provision
C₹903 — 9 units × ₹100 + 1 expected-returned unit × ₹3 restocking fee
D₹900 — 9 units × ₹100, with the restocking fee recognised separately if and when realised
Answer & Solution
Correct answer: C. ₹903 — 9 units × ₹100 + 1 expected-returned unit × ₹3 restocking fee
Restocking fees on goods expected to be returned are INCLUDED in the transaction price at contract inception. Revenue = (9 × ₹100 not expected to be returned) + (1 × ₹3 restocking fee on the expected return) = ₹903. A refund liability of ₹97 is also recognised (1 unit × (₹100 - ₹3)). The fee is part of the entity's consideration, not a separate event.
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