CIMAPRA19-F02-1 Exam - Topic 1 Question 21 Discussion

Question

RST sells computer equipment and prepares its financial statements to 31 December.

On 30 September 20X5 RST soldcomputer software along with a two year maintenance package to a customer. The customer is given the right to return the goods within six months and claim a full refund if they are not satisfied with the computer software. The risk of return is considered to be insignificant for RST.

How should the revenue from this transaction and the right of return be recognised in thefinancial statements for the year ended 31 December 20X5?

Merlyn · Accepted Answer

D) Recognise 100% of the revenue from the sale of goods,12.5% of the revenue from the maintenance contract and create aprovision for the anticipated level of returns.

Merlyn · Answer

A) Recognise 100% of the revenue from both the sale of goods and the maintenance contract and create aprovision for the anticipated level of returns.

Merlyn · Answer

B) Do not recognise any revenue from the sale of goods or the maintenance contract and do not create aprovision for the anticipated level of returns.

Merlyn · Answer

C) Recognise 12.5% of the revenue from both the sale of goods and the maintenance contract and do not create aprovision for the anticipated level of returns.