Page 505 - F2 Integrated Workbook STUDENT 2019

Supplementary objective test questions

7.5 Shaggy enters into a contract with its customer, Scooby, to build a new Mystery
Machine. The product is highly specialised and cannot be sold onto other
customers. The contract is in its early stages and the overall outcome is
uncertain. Surveyors estimate that the work is 5% complete. Costs incurred to
date are $100,000 and 50% of the costs are deemed to be recoverable from the
customers. The total contract price is $3,000,000.

Which of the following statements is true regarding the accounting
treatment of this contract as per IFRS 15?

A Revenue of $150,000 will be recorded in the SOPL

B Revenue of $100,000 will be recorded in the SOPL

C Revenue of $50,000 will be recorded in the SOPL

D No revenue should be recorded for this contract

7.6 Salah Ltd is an interior design company. At the beginning of the year, Salah
signed a contract with a large customer, VVD who runs a chain of pubs and
clubs, to redesign 5 VVD branches. The consideration for the contract includes
a fee of $850,000 payable in cash, 100,000 shares in VVD receivable
immediately and a bonus of $150,000 if the renovations are completed within 6
months. Salah Ltd has an excellent reputation for completing jobs on time.
Salah consider it highly probable that no delays will occur. Salah’s share prices
at the time of signing the contract were listed at $1.50 and, at the year end,
$2.00.

Which of the following statements regarding this contract is false?

A The transaction price for this contract will be $1,150,000

B Revenue will be recorded over time for this contract

C Revenue of $200,000 will be recorded by the completion date of each of
the 5 renovations

D The consideration received in shares will be valued at $150,000

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