Question
Meridian Systems Ltd delivered a control system to a customer on 1 October 2024 under a single contract priced at 2,610,000. The contract bundles the equipment, which the customer took control of on delivery, with 12 months of installation and servicing beginning the same day. The stand-alone selling prices are 2,450,000 for the equipment and 160,000 for the installation and servicing. Other 2024 figures: cost of sales 1,268,000, distribution costs 214,000, administrative expenses 352,000 and finance costs 46,000. The income tax rate is 25%.
Prepare the multi-step statement of profit or loss for the year ended 31 December 2024, applying IFRS 15 to the bundled contract. Present revenue by performance obligation.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
How to approach this
IAS 1 — Presentation of Financial Statements
Classify every balance as revenue or expense, then decide where it sits relative to the operating-profit line. Build the statement in the order the subtotals require, since a misplaced line changes every total beneath it.
Common mistakes
- Including a balance sheet account among revenues or expenses.
- Placing finance costs or investment income within operating expenses.
- Omitting income tax expense, or presenting it before pre-tax profit.
Further readingIncome statement vs balance sheet