Fluorine  Limited (FL),  a  manufacturer  of  ships,  has entered  into  the  following  contracts 

during the year ended 31 December 2022: 

(i) 

On 1 January 2022, FL entered into a contract with Alpha Limited (AL) to construct 

a cruise ship for Rs. 400 million to be delivered on 31 December 2023 i.e. the date on 

which  control of the ship would be  transferred to  AL. As per  the  contract, 90%  of 

agreed amount was paid immediately by AL and the balance will be paid on delivery.  

 

Till 31 December 2022, only 40% of the construction of the ship was completed at a 

cost of Rs. 150 million. 

(ii) 

On 1 April 2022, FL entered into a contract with Beta Limited (BL) to sell three fishing 

boats for Rs. 50 million per boat. The amount was received on 1 April 2022 but the 

boats were delivered on 1 May 2022. As per the contract, if BL purchases more than 

six  boats  before  31  December  2022,  FL  will  retrospectively  reduce  the  price  to   

Rs. 48 million per boat. At the inception of the contract, FL expected that BL would 

meet the threshold for the discount.  

On  1  November  2022,  BL  purchased  two  additional  boats  on  the  same  price  of   

Rs. 50 million per boat for which the payment was made in January 2023.  

 

 

 

 

 

 

 

Despite FL’s expectation, no further order was placed by BL till 31 December 2022. 

(iii) 

On  1  November  2022,  FL  sold  a  luxury  yacht  to  Gamma  Limited  (GL)  for  

Rs. 100 million on cash. FL also provided GL with a Rs. 5 million discount voucher 

for any interior design work on yacht within six months. There is 80% likelihood that 

GL  will  award  the  work  of  interior  design  within  six  months  and  will  avail  the 

discount. However, no interior design work was awarded till 31 December 2022. FL 

normally sells such luxury yachts for Rs. 100 million without any discount voucher for 

interior design work. 

Discount rate of 15% per annum may be used wherever required.