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Answers

Example 10.1 cont'd

Statement of financial position (extract)

A B C

$000 $000 $000
Costs incurred 346 421 198
Profits/losses recognised 46 (194) –

Progress billings (324) (202) (144)

––––– ––––– ––––
Amounts due from customers 68 25 54

Project B

A loss has been made on this contract of $194,000 therefore Mane must
recognise the whole of the loss immediately. The revenue will be calculated as
normal and the cost of sales becomes the balancing figure.

Project C

As Project C has an unknown cost to complete it is not possible to reliably
estimate the total contract profit. Therefore, costs incurred become cost of sales
and the same amount is recognised as revenue so that a nil profit is shown.

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