Page 543 - F2 Integrated Workbook STUDENT 2019

Answers to supplementary objective test questions

7.3 B

This contract sees the creation of an asset controlled by the customer. As a
result, revenue should be recorded over time.

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.

NB. The cost of sales is actually made up of $463,500 (45% × (470,000 +
560,000)) + $126,500 provision for onerous contract per IAS 37.

7.4 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)
–––––––
Contract liability (160,000)
–––––––

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