Question

Presented below are three revenue recognition situations. (a) Groupo sells goods to MTN for $919,000, payment due at delivery. (b) Groupo sells goods on account to Grifols for $770,000, payment due in 30 days. (c) Groupo sells goods to Magnus for $483,000, payment due in two installments, the first installment payable in 18 months and the second payment due 6 months later. The present value of the future payments is $443,700.

Answer 1

Answer:

Find below the requirement of the question:

Indicate the transaction price for each of these transactions and when revenue will be recognized.

1.At the time of delivery-$919,000

2 At the time of delivery-$770,000

3.At the time of delivery-$443,700

Explanation:

Generally speaking, from IFRS and U.S GAAP standpoint,revenue should be recognized when the seller has delivered goods to the customer or when services  have been rendered,in essence the revenue recognition time is at the time of delivery for the three situations.

However,the amount to be recognized differs from one situation to the other,hence $919,000 should be recognized in the first instance and $770,000 in the second situation.

Finally,only the present value or present worth is recognized in the third situation as that reflect the fair value  of goods sold.