ACCA FR · Chapter 5 · Question 7 of 11
In the last week of its financial year Jackdaw Co sold 1,000 units at $100 each, giving customers 30 days to return any unwanted units for a full refund. Based on experience, Jackdaw Co expects 5% of the units to be returned. How much revenue should be recognised for these sales?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $95,000
Explanation
Expected returns are variable consideration. Jackdaw Co recognises revenue only for the goods it expects to keep: 1,000 x $100 x 95% = $95,000. A refund liability of $5,000 is recognised for the expected returns, together with an asset for the right to recover the goods.
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