Use the information below to answer the following questions:
Holidays Ltd manufactures caravans. Transactions for the year ended 30 June 2012 were as follows:
(i) 1200 caravans were manufactured at a cost of $15 000 each.
(ii) 1000 caravans were sold for $20 000 each.
(iii) Cash was collected on 950 of the caravans sold.
-What was the reported profit for the year ended 30 June 2012 if revenue was recognised at the point of sale?
A) $4 750 000
B) $5 000 000
C) $6 000 000
D) $2 000 000.

Question

Use the information below to answer the following questions:
Holidays Ltd manufactures caravans. Transactions for the year ended 30 June 2012 were as follows:
(i)	1200 caravans were manufactured at a cost of $15 000 each.
(ii)	1000 caravans were sold for $20 000 each.
(iii)	Cash was collected on 950 of the caravans sold.
-What was the reported profit for the year ended 30 June 2012 if revenue was recognised at the point of sale?
A) $4 750 000
B) $5 000 000
C) $6 000 000
D) $2 000 000.

Quizplus · Accepted Answer

The revenue recognised for the year is calculated as follows: 
1000 caravans sold x $20,000 = $20,000,000
The cost of manufacturing the 1200 caravans is calculated as follows: 
1200 caravans manufactured x $15,000 = $18,000,000
Therefore, the reported profit is calculated as follows: 
$20,000,000 - $18,000,000 = $2,000,000
Since the revenue is recognised at the point of sale, the cash collected on 950 of the caravans sold is irrelevant to calculating the reported profit.

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