Journal entry at time of sale assuming 3 returns and no revenue reversal-->

Dr Cash 10,000 (100 * $100)

Dr Cost of good sold 5,820 (97* $60)

Dr Right to recover products 180 (3 *$60)

Cr Revenue 9,700

Cr Refund liability 300

Cr Inventory 6,000 (60* 100)

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Journal entry when refund period is over (assuming no returns)-->

Dr Refund liability 300

Dr Cost of good sold 180

Cr Right to recover products 180 (3 *$60)

Cr Revenue 300

Q1a) What is the journal entry when the refund period is over if 2 products are returned?

Q1b) What is the journal entry when the refund period is over if 5 products are returned?

IFRS 15 Determining the transaction price Variable consideration Right of return example Company sells 100 products for $ 100 each Cash is received when control of product transfers Customer is allowed 30 days to return with full refund The Company cost is $ 60. Analysis The right of return makes the consideration variable Must consider if there will be a significant revenue reversal Company must choose a measurement method (expected value or single most likely amount) to determine the revenue IFRS 15 - Determining the transaction price Analysis In this case the return is outside the Company's influence since the customer chooses to return or not But the uncertainty will be resolved in a short period of time To illustrate the process we will assume the company has some experience in determining the amount of returns and has concluded they expect 3 products will be returned in the return period Conclusion At the time of the sale the Company will not recognize revenue for the 3 products to be returned The Company will recognize a refund liability for the difference in cash received versus revenue recognized The Company will also record an intangible asset for the right to returned products (assuming they can be sold again)