On 1 st January 20X8, entity J enters into a one-year contract with a customer to deliver water treatment chemicals. The contract stipulates that…

The transaction price is 90per container based on entity J's estimate of total sales volume for the year, since the estimated cumulative sales volume of 2.8 million containers would result in a price per container of 90. Entity J concludes that based on a transaction price of 90per container, it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. Revenue is therefore recognized at a selling price of 90per container as each container is sold. Entity J will recognize a liability for cash received in excess of the transaction price for the first 1 million containers sold at 100 per container (that is,10 per container) until the cumulative sales volume is reached for the next pricing tier and the price is retroactively reduced. For the quarter ended 31 st March, 20X8, entity J recognizes revenue of 63million (700,000 containers x 90) and a liability of 7million [700,000 containers x (₹ 100 -90)]. Entity J will update its estimate of the total sales volume at each reporting date until the uncertainty is resolved.