Substance over form – retention of title
On Dec 31, 01, wholesaler W delivers merchandise under retention of title to retailer R. On that date, the significant risks and rewards of ownership are transferred. W retains neither effective control nor continuing managerial involvement to the degree usually associated with ownership. The carrying amount of the merchandise in W”s statement of financial position is CU 4. They are sold for CU 5.
Required
Prepare all necessary entries in the financial statements as at Dec 31, 01 of (a) W and (b) R.