Question

Johnson Ltd is entering into a contract to sell boat products to Fisher Ltd for $50 000. The agreement allows Fisher Ltd to pay for these goods by equal instalments, the first instalment being required on delivery and the remainder to be paid every 6 months for the next 2 years. The boat products are delivered to Fisher Ltd on 1 January 2020. Johnson Ltd determine that an appropriate discount rate for interest on this transaction is 5% per annum.

Required

Advise Johnson Ltd on how the company is to account for the revenue from this transaction.

how do we calculate the installments i.e 12967 and interest i.e 926, 625, 317.

Answer 1