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Coate's revenue comprises mainly the sale of electricity and green certificates. Coate obtains green certificates under a national government scheme. Green certificates represent the environmental value of green electricity. The national government requires suppliers who do not produce green electricity to purchase a certain number of green certificates. Suppliers who do not produce green electricity can buy green certificates either on the market on which they are traded or directly from a producer such as Coate. The national government wishes to give incentives to producers such as Coate by allowing them to gain extra income in this way. 

Coate obtains the certificates from the national government on satisfactory completion of an audit by an independent organisation, which confirms the origin of production. Coate then receives a certain number of green certificates from the national government depending on the volume of green electricity generated. The green certificates are allocated to Coate on a quarterly basis by the national government and Coate can trade the green certificates.  Coate is uncertain as to the accounting treatment of the green certificates in its financial statements for the period ended 30 November 20X2 and how to treat the green certificates which were not sold at the end of the reporting period.

Discuss how the above events should be accounted for in the financial statements of Coate.

Requirements:

Discuss how the above events should be accounted for in the financial statements of Coate.

Marks: 7

Answers submitted

Created by Ref Marking Action
Kawsar Ahmed's picture
Kawsar Ahmed
04/12/2021 - 05:10

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