FAR - Revenue

Question 1

When should the transaction price be adjusted for the effect of the time value of money?

Answer 1

when there is a significant difference between the selling price of the product and if there is a significant financing component

Question 2

Is the sales tax included in the transaction price of the contract?

Answer 2

No, the transaction price is the revenue that the company receives for exchanging the good or service

Question 3

If the repurchase price is greater than the original price paid by the customer, how should the seller account for the transaction?

Answer 3

The seller should account for the transaction as a financing arrangement and should credit financial liability instead of revenue/deferred revenue

Question 4

When would a seller book a transaction as a financing arrangement?

Answer 4

when the repurchase price and the expected market value are greater than the original purchase price