On 1 January 2022 (the contract date), Furniture Ltd sold R1 200 000 worth of furniture to a new housing development in Centurion. Furniture Ltd immediately credited their sales revenue with the R1 200 000. Included in the sales contract, was a complementary servicing arrangement in which Furniture Ltd would provide the customer with annual servicing of the furniture (in case of any breakages or manufacturing faults) for a period of three years from the date of the contract. The normal selling price of the furniture without any annual servicing is R1 400 000. The normal price charged to customers for annual servicing is R14 000. REQUIRED: Calculate the amount of revenue that Furniture Ltd should recognise, for the financial year end of 30 June 2022, with respect to the transaction above. Ignore the time value of money and VAT.
On 1 January 2022 (the contract date), Furniture Ltd sold R1 200 000 worth of
furniture to a new housing development in Centurion. Furniture Ltd immediately
credited their sales revenue with the R1 200 000. Included in the sales contract, was
a complementary servicing arrangement in which Furniture Ltd would provide the
customer with annual servicing of the furniture (in case of any breakages or
manufacturing faults) for a period of three years from the date of the contract.
The normal selling price of the furniture without any annual servicing is R1 400 000.
The normal price charged to customers for annual servicing is R14 000.
REQUIRED:
Calculate the amount of revenue that Furniture Ltd should recognise, for the
financial year end of 30 June 2022, with respect to the transaction above.
Ignore the time value of money and VAT.
Step by step
Solved in 2 steps
