House Proud Pty Ltd is operating a promotion selling furniture under the following conditions:
• Initial deposit of 20% of purchase price.
• Immediate delivery of furniture.
• Interest rate of 12.5%pa charged on the outstanding balance.
• Repayment of the balance (including the interest) over 24 equal monthly installments.
• House Proud retains legal title to the furniture until the final monthly payment has been made.

House Proud would recognise revenue as follows:

Question

House Proud Pty Ltd is operating a promotion selling furniture under the following conditions:
•	Initial deposit of 20% of purchase price.
•	Immediate delivery of furniture.  
•	Interest rate of 12.5%pa charged on the outstanding balance.
•	Repayment of the balance (including the interest) over 24 equal monthly installments.  
•	House Proud retains legal title to the furniture until the final monthly payment has been made.

House Proud would recognise revenue as follows:

Quizplus · Accepted Answer

House Proud Pty Ltd should recognize interest as it is received (monthly) as it adheres to the matching principle in accounting. The revenue on the sale of the goods should be recognized upfront as there is immediate delivery of furniture and an initial deposit of 20% of the purchase price is already received. However, as House Proud retains legal title to the furniture until the final monthly payment has been made, revenue cannot be fully recognized upfront. Therefore, revenue should be recognized on a deferred basis, and the revenue on the sale of the goods should be recognized upfront, while the interest should be recognized as it is received.

House Proud Pty Ltd Is Operating a Promotion Selling Furniture