The online shop Mailles Fines sells 1,000 units sweaters at EUR 90 each; each sweater was carried in inventory at EUR 40. Customers may send a sweater back for a refund, or exchange it for the same model in another size, at the same price and in the same condition. Based on its history (case data, returns constrained in accordance with the variable consideration requirements), Mailles Fines expects 80 units sweaters to be sent back, of which 30 units for a mere size exchange. For each refunded sweater, it expects a recovery cost of EUR 3 and a total decrease in value of EUR 200 across all the refunded sweaters (costs relating to exchanges are ignored for this exercise — teaching assumption). Calculate revenue, the refund liability and the asset for the right to recover the products.
- Sweaters sold
- 1,000
- Unit selling price
- 90
- Unit carrying amount in inventory
- 40
- Sweaters expected to be sent back
- 80
- Of which expected size exchanges
- 30
- Recovery cost per refunded sweater
- 3
- Total decrease in value of the refunded sweaters
- 200