Reference no: EM133035898

Question - MYOB Ltd is a company which manufactures and sells heaters. MYOB received a special order, on 19 April 2014, from the government of Antarctiano (the coldest country in the world) for the supply of 1,000,000 oil heaters.

The government was responding to weather forecasts indicating that the country would be experiencing an exceptionally cold winter that year. The normal selling price of this type of heater was R1 653 (incl. VAT) per unit.

Given the size of the order, the parties was agreed that a special discount of 18% would be offered for this order. Furthermore, the purchase price would be payable in instalments as follows:

Instalment 1: 20% of the purchase price. Payable on date of delivery.

Instalment 2: 40% of the purchase price. Payable one year after date of delivery.

Instalment 3: 40% of the purchase price. Payable two years after date of delivery.

In addition to the above, MYOB also agreed to bear all of the delivery costs associated with the transaction for no extra charge. Based on their pricing policy, MYOB would have ordinarily charged R500,000 for the delivery.

The items were delivered by ship and arrived in Antarctiano on 30 June 2014. The first instalment was made by the government of Antarctiano on the same day. The government of Antarctiano has a very good credit record and the risk of default is considered to be remote.

Required - Discuss how MYOB should determine the amount of revenue which they should recognise in respect of their contract?