Analyse the transaction between Daily Mart and Max Retail with respect to the recognition of revenue and financing component.

Is resolved. Recognize revenue for the portion of goods expected not to be returned. Refund liability is recognized for the amount expected to be refunded. Daily Mart will recognize revenue when control of the goods is transferred to Max Retail and it becomes probable that no significant reversal will occur i.e., after the 90-day return period, as the product is new and the return history is unavailable. The contract also includes a significant financing component. This is evident from the difference between the amount of promised consideration of 1,21,000 and the cash selling price of 1,00,000 at the date that the goods are transferred to the customer. The contract includes an implicit interest rate of 10 per cent (i.e. the interest rate that over 24 months discounts the promised consideration of 1,21,000 to the cash selling price of 1,00,000). The entity evaluates the rate and concludes that it is commensurate with the rate of interest that would be reflected in a separate financing transaction between the entity and its customer at contract inception. At the time of delivery: A contract liability of 1,00,000 is recognized, deferring revenue recognition.After 90 days, when returns are no longer expected, the contract liability is reversed and revenue of 1,00,000 is to be recognized. Financing component of 21,000 shall be recognized as interest income over the period of 2 years. Until the entity receives the cash payment from the customer, interest revenue would be recognized in accordance with Ind AS 109. In determining the effective interest rate in accordance with Ind AS 109, the entity would consider the remaining contractual term.