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ACCA Applied Knowledge · Financial Accounting · Receivables and payables

Brindle Ltd sells goods with a list price of $20,000 and gives its customer a 10% trade discount. A further 4% settlement discount is offered on the net invoice amount for payment within 14 days. The customer pays within 14 days. What amount of revenue should Brindle recognise, assuming it expects the customer to take the settlement discount?

Revenue is $17,280. The 10% trade discount reduces the list price to $18,000, and because the customer is expected to take the 4% settlement discount, the transaction price is reduced further to $17,280 under IFRS 15.

  1. A$20,000
  2. B$18,000
  3. C$17,280Correct
  4. D$19,200

Explanation

Trade discount reduces the price: $20,000 x 90% = $18,000. Expecting the settlement discount, the consideration is reduced by 4%: $18,000 x 96% = $17,280. Option B ignores the settlement discount, and $20,000 ignores both.

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