BUILDING COMPANY provided the following information about one of it's construction contracts (CONTRACT XY): Cost incurred to date: $500,000 Cost to complete: $2,500,000 Contract price = Total Cost Plus $1,000,000 Amount paid to date by client: $100,000 How much revenue should BUILDING COMPANY recognize on CONTRACT XY? How much PROFIT/LOSS should BUILDING COMPANY recognize on CONTRACT XY?
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- send me the correct solution pleaseQ2. Malama Limited is considering whether to continue the work on an existing contract or to terminate it now and pay an agreed penalty of K90, 000, 000 to the client. This is being considered because the penalty is less than the anticipated contract loss. The following summary has been prepared: Expenditure to date Estimated future costs to completion in one (1) years' time Material Staffing Overheads Estimated total cost Contract value Estimated loss on contract The following information is also available: K'000 other contracts. 80, 000 50,000 90,000 K'000 150,000 220,000 370,000 200,000 80,000 Material Contracts have been exchanged for the purchase of the K60, 000, 000 materials. This is special purpose material which has no alternative use. If not used on this contract it will incur disposal costs of K10, 000, 000. Staffing Two specialists are employed on the contract each at K12, 500, 000 p.a. If the contract was terminated now they would each receive K7,000, 000 redundancy pay.…Computing Revenue and Gross Profit on Long-Term Construction Contract Supplier Corp. enters into a government contract during the year to provide computer equipment for $4,400,000. The contract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $3,080,000 . The equipment is highly specialized and has no alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract cancellation. Actual costs incurred during the year were $1,408,000 including unexpected cost overruns of $176,000 due to labor inefficiencies.a. Would revenue be recognized over time or at a point in time for this contract?Answer b. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be recorded during the year. 1. Recognized revenue Answer 2. Gross profit Answer…
- For a construction firm using the cost recovery method, if costs exceed billings ons some contracts by 1,000,000 and billings exceed costs by 800,000 on others, the contracts should ordinarily be reported as a? a. current asset of 200,000 b. current liability of 200,000 c. current asset of 1,000,000 less a contra-current asset of 800,000 d. current asset of 1,000,000 and a current liability of 800,000Long-term Contracts Clorad Corp. contracts with a customer to construct a building. It appropriately determines that it has one performance obligation which is satisfied over time. Using the following information for Year 1, compute Clorad's (a) total estimated costs for the contract, (b) revenue to date, and (c) gross profit recognized. Year 1 (of 4-year project): Construction costs incurred during the year $174,000 Estimated costs to complete the contract 426,000 Partial billings to customers 100,000 Collections from customers 25,000 Total contract price 1,000,000 (a) Total estimated costs for the contract $ (b) Revenue to date $ (c) Gross profit recognized $Bank Al-Izz provided working capital to Tijarah Construction. based on the principle of musharakah mutanaqisah amounting to OR 400,000. Profit and loss sharing ratio as agreed by both parties is similar to the ratio of capital contribution which is 40:60 (Bank: Customer) at the beginning of the contract. The repayment shall be equal throughout the contract period. The profit and loss for the above project is as follows: Year 1 Loss of OR 180,000 Year 2 Profit of OR 150,000 Year 3 Profit of OR 220,000 Year 4 Loss of OR 80,000 Determine the profits or losses to be recognised by Bank Al-Izz for Year 1 Year 2 Year 3 Year 4
- Determining the Transaction Price for a Revenue Contract A contractor enters into a revenue contract with a customer to build customized equipment for $180,000 with a performance bonus of $99,000 that will be paid based on how quickly the equipment is completed. The amount of the performance bonus decreases by 15% of the original bonus per week for every week beyond the agreed upon completion date. The contractor has had experiences with similar contracts and thus has the data to predict the timing of completion of the contract. Therefore, the contractor concludes that the expected value method is the best predictor of revenue. The contractor estimates that there is a 60% probability that the contract will be completed by the agreed-upon completion date, a 35% probability that it will be completed one week late, and a 5% probability that it will be completed two weeks late. Complete the following table in order to determine the transaction price for revenue recognition for the…ABC Co. estimates total contract costs at completion d In 20x2. ABC incurs actual costs of P2.45M and revizes its ABC completes the construction in 20x3 The actual total 6. In 20x1, ABC Co. enters into a contact with a customer for the uses the cost-to-cost method in measuring its progress on the estimate of total contract costs at completion to P4.6M. construction of a building. The contract price is P6M. ABC Co. me contract. cost of the contract is P4.5M. How much is the profit recognized in 20x3? a. 420,000 b. 450,000 c 500,000 d. 550,000On September 1, 20x1, ABC Co. enters into a contract with a customer to remodel a plant's electrical wirings and install a new generator for a total consideration of P10M. The remodeling and the installation single performance obligation treated as a satisfied over time. The expected contract costs Generator LO as follows: Other costs Expected total contract costs 2,500,000 4,000,000 6,500,000 VERSITY Additional information: • ABC Co. uses the cost-to-cost method in measuring its progress towards the complete satisfaction of the performance obligation. • ABC Co. incurs total costs of P4,000,000 in 20x1, including the cost of the generator. The customer obtains control of the generator when it is delivered to the site in December 20x1. However, the generator will not be installed until March 20x2. • • ABC Co. regards the cost of the generator as significant in relation to the expected total contract costs-eating during examinations, quizzes or plagiarism in connection . Although ABC Co.…
- 15. In 20x1, Espresso Co. started work on a long-term construction contract. Espresso Co. accumulates costs and recognized profits using the Information on the contract is as follows: "Construction in progress" account. 20x1 20x2 Accounts receivable, ending balances Costs incurred each year 250,000 750,000 262,500 480,000 Construction in progress, ending balances Progress billings, cumulative balances 305,000 910,000 250,000 1,050,000 Espresso bills the customer based on the project's stage of completion, which is computed using the costs incurred. How much are the profit, revenue and total collections in 20x2, respectively? a. 125,000; 605,000; 300,000 b. 149,000; 640,000; 326,000 c. 50,000; 242,000; 120,000 d. 150,000; 620,000; 300,000For a construction firm using the cost recovery method, if costs exceed billings on some contracts by P1,000,000 and billings exceed costs by P800,000 on others, the contracts should ordinarily be reported as a a. Current asset of P1,000,000 and a current liability of P800,000 b. current asset of 200,0001. Under a negotiated contract of Php 178M, a contractor actually spends Php 152M upon completion of the project. Find the contractors' profit under 75%-25% sharing clause between the owner and contractor respectively.