Page 497 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Answers to supplementary objective test questions

CHAPTER 7 – REVENUE

7.1 A

Revenue should be recognised on a monthly basis when each new magazine
under the subscription is delivered. Revenue should only be recognised from
the month following that in which cash is received e.g. cash received in
September, first copy delivered in October, revenue only recognised from
October onwards.

September subs (Oct – Dec delivery) $780,000 × 3/3 = $780,000

October subs (Nov – Jan delivery) $850,000 × 2/3 = $566,667

November subs (Dec – Feb delivery) $800,000 × 1/3 = $266,667

Total revenue = $1,613,334

7.2 C

Revenue on equipment can be recognised in full immediately as the risks and
rewards transfer immediately. However the revenue relating to the technical
support will need to be recognised over the 3 year period over which it covers.
Only 9 months of the support service has been provided during the year ended
31st Mar 20X5.

Revenue to recognise:

Equipment $500,000
Technical support ($150,000/3) × 9/12 $37,500

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Revenue for y/e 31/03/X5 $537,500

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