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Answers to supplementary objective test questions

CHAPTER 10 – CONSTRUCTION CONTRACTS

10.1 B
Step 1: Total profit
$
Contract price 800,000
Less
Cost incurred to date (470,000)
Expected costs to complete (560,000)
–––––––
Total loss on contract (230,000)
–––––––
Step 2: Stage of completion
Stage of completion 45%
Step 3: P/L figures
Revenue (contract price × 45%) 360,000
Cost of sales (590,000) β
–––––––
Total Loss (230,000)

As the contract is a loss making contract, the total loss should be recognised
immediately in 20X9’s accounts.

10.2 D

Using the figures determined in the previous answer:
Step 4: SOFP figures
Cost incurred to date 470,000
Loss recognised in P/L (230,000)
less
Progress billings (400,000)
–––––––
Amounts owing to customers (160,000)
–––––––

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