Requirement – 1
Principal
Principal is the legal owner of goods or service which is transferred to the customer for legal consideration.
Agent
Agent is a facilitator for transferring goods and service from seller to buyers. Agent receives commission from principal for the service rendered.
Performance obligation
Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.
The revenue recognition principle
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.
Case summary:
AC.Com sells the used products which are collected from different suppliers. A customer purchases a used bicycle from AC.Com for $300. AC.Com agrees to pay the supplier $200, and the bicycle is shipped from the supplier to the customer directly.
To determine: The amount of revenue recognized at the time of the sales to the customer, and assume AC.Com takes control on used bicycle.
Requirement – 2
The amount of revenue recognized at the time of the sales to the customer, and assume AC.Com never takes control on used bicycle.
Requirement – 3
The amount of revenue recognized at the time of the sales to the customer, and assume AC.Com promises to pay $200 to the supplier.
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INTERMEDIATE ACCOUNTING RMU 9TH EDITION
- RESET 24. Hire purchase agreement refers to A. an agreement between the lessee and the lessor for using a particular asset over a period of time against the periodic payments B. an agreement whereby a person hires goods for a period of time by paying installments and can own the goods at the end of the agreement if all installments are paid C. arrangement whereby one party sells goods to a second party with the promise to repurchase the goods at a future point in time D. an agreement whereby one party hires a particular asset for a set time period at a fixed monthly cost | | || Cancel Done 中。arrow_forward20. The list price of an air conditioner is OMR 250. If manufacturer sells this product to a retailer for list price less 15% discount, what will be the amount of account receivable to be recorded by the manufacturer? a. OMR 250 b. OMR 212.50 c. OMR 37.50 d. OMR 287.50arrow_forwardIFRS 15 Revenue from Contracts with Customers requires strict recognition standards for revenue. Which of the following is correct for recognising revenue? A The sales of $1 million from Alby Co which comes from the repurchase agreement with its customer Bully Co. It is probable that Alby would repurchase the goods from Bully Co. B The sales of $200,000 from Cello Co acting as an agent for Dean Co. D The sales of $10,000 from Elegant Co to the distributer Fusion Co. The Elegant Co remains the ability to direct the use of the asset, and obtains substantially all of the remaining benefits from the asset. Giant Co recognised the revenue of $173,554 for the sale of goods on 1 January 20X7. The amount is due for settlement for the two equal instalments of $100,000 on 1 January 20X8 and 1 January 20X9. The cost of capital of 10%.arrow_forward
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- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning