Question
ALFA Ltd is an ASX listed company established in 2000. The company employs 45 people and generate revenue of 20 million dollar a year. The
ALFA Ltd is an ASX listed company established in 2000. The company employs 45 people and generate revenue of 20 million dollar a year. The company assembles and export computers and accessories to developing countries primarily to South Asian and African countries.
The company sold 1000 computers at the price of $1100 per computer to DELTA Ltd, (Bangladesh based company) on 1 April 2019. The terms of sale clearly stipulate that DELTA Ltd can return all computers within 6 months if it chooses to do so. No explanation is needed but if it decides to return, it will be subject to 9% interest on the total cost of the computers purchased. ALFA Ltds financial year ends on 30th of June each year. DELTA Ltd has not decided yet if it wants to return the computers but it has another 3 months to make this decision.
Required
a. Explain if ALFA Ltd is a reporting entity under IASB conceptual framework. (7 marks)
b. Can ALFA Ltd recognise the sale of computers as the sales revenue for the reporting period ending 30 June 2019? Explain using the relevant conceptual framework definitions and recognition criteria. (9 Marks)
c. What should the accountant of ALFA Ltd should do if there is a conflict between Accounting Standards and the Conceptual Framework in the accounting treatment of the sale of computers? Explain. (4 Marks)
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