Read the scenario and answer the questions that follow. Required: Discu...
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Read the scenario and answer the questions that follow.
Velocity Auto Sales (Pty) Ltd ("Velocity Auto") is a premium car dealership that offers customers the option to purchase a car either with or without a 3-year maintenance plan. The dealership launched a bundled package on 1 July 2024, where customers could purchase a Velocity-X sedan for R500,000, inclusive of a 3-year maintenance plan. Customers also have the option to purchase the car without the maintenance plan for R460,000. The standalone selling price of the maintenance plan is R90,000. During the financial year, 10 cars were sold with the maintenance plan. Control of the vehicle is transferred to the customer upon payment and delivery of the car. Source: Mqadi, S, 2025
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Required:
Discuss how revenue should be recorded by applying the 5-step revenue model for the recognition and measurement of revenue in accordance with IFRS 15 - Revenue from Contracts with Customers. Show all necessary calculations and prepare the journal entries for the initial revenue recognition.
(20 Marks)
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