Financial Accounting - Essay and Problem-Based Questions

Question 2) - (5 marks)

When the project commenced (at the beginning of the financial year), Large Mart intended to sell the program to UNE students directly through its Armidale store. However, on the day the new program goes on sale, Large Mart receives an offer from UNE to purchase 25,000 copies of the program (on CD) for $200,000 because UNE would like to supply a version of the program to each student free of charge. Large Mart accepts UNE's offer and produces the 25,000 CDs at a production cost of $1 per CD (IMPORTANT NOTE: the cost of $1 per CD does NOT include any research or development expenditures for the program!). On the day, the CDs are delivered to UNE, Large Mart receives the $200,000 payment for the CDs. However, the Large Mart accounting department is unsure how to calculate the cost of Goods Sold for this sales transaction.