Page 446 - F2 Integrated Workbook STUDENT 2019

Chapter 19

Example 7.8 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)

––––– ––––– ––––
Contract asset 68 25 54

Project B

Project B is anticipated to make a loss 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. Revenue can only be recognised up to any
recoverable costs. 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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