Sale of Service &

Product
CBE Specimen Exam [Q.29]
• Speculate Co is preparing its financial statements for the year ended 30
September 20X3.
• On 1 October 20X2, Speculate Co sold one of its products for $10m.
• As part of the sale agreement, Speculate Co is committed to the ongoing
servicing of its product until 30 September 20X5 (ie three years after the sale).
• The sale value of this service has been included in the selling price of $10m.
• The estimated cost to Speculate Co of the servicing is $600,000 per annum and
Speculate Co’s gross profit margin on this type of servicing is 25%.
• Ignore discounting.
• What is the amount of deferred income which Speculate Co should recognise in
its statement of financial position as at 30 September 20X3 relating to the
contract for supply and servicing of products? (Answer in $m)
CBE Specimen [Q.30]
• Using the information in previous question, only two of the following
statements in respect of Speculate Co's deferred income
at 30 September 20X3 are true. Identify these statements, by clicking
on the relevant box in the table below and mark all the others as
false.
September 2016 [Q.26]
September 2016 [Q.27]
September 2016 [Q.28]
June 2016 [Q.3][Adapted]
• Revenue includes an amount of $16 million for a sale made on 1 April 2015.
• The sale relates to a single product and includes ongoing servicing from Downing
Co for four years.
• The normal selling price of the product and the servicing would be $18 million
and $500,000 per annum ($2 million in total) respectively.
• Financial Year end – 31st March
• Calculate:
a) Revenue to be recognized in SOPL from sale of product
b) Other Income to be recognized for the year ended 31st March 2016 w.r.t
ongoing service
c) Deferred Income , show the split between current & noncurrent liability