Entity A is a construction company listed in Hong Kong.It commenced a contract to build a bridge for Entity B in the year ended 30 September 2020. The contract price was agreedat $2,800 million and the total expected costs of the contract have been confirmed as $1,500 million.Entity A will satisfy the performance obligation over time.The following figures were correctly recognised in the Statement of Profit or Loss for the year ended 30 September 2020:Revenue$1,000 millionCost of Sales$480 millionProfit$520 millionThe following figures are also relevant in relation to this contract:20202021MillionMillionCosts incurred to date$660$1,020• Work certified to date$880$2,100Entity A recognises progress on a work certified basis.REQUIRED:Measure the contract revenue and contract cost for Entity A in its Statement of Profit or Loss for the year ended 30 September2021.ANSWER:Contract revenue =$MillionContract cost = $Million%3D

Recognition on work certified basis means that a company used to recognize the revenue and expenses…

Answered: Entity A is a construction company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2018, Sansa Construction entered into a contract amounting to P10,000,000 to construct a building. The engineers of the company estimated that on December 31, 2018, the building was 75% completed. If the expected gross profit rate from the contract is 15%, what is the reportable income of the company in 2018 under the percentage of completion method? a. P1,125,000 b. P1,500,000 c. P7,500,000 d. P10,000,000 e. Answer not given
The Leverenz Construction Company began work on a $15,000 contract on 1/1/20. Planned completion was in 2022. The Percentage-of-Completion method is used. Given the following: Costs incurred to date Estimated costs to complete Billings to date Collections to date 2021 Net Income (Loss) is: Select one: O a. $(650) O b. $(200) O c. $(539) O d. $(89) e. $200 2020 $3,300 9,900 3,000 2,900 2021 $6,800 8,400 5,800 5,500 2022 $15,700 0 13,000 12,000
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,860,000. The project began in 2021 and was completed in 2022 Data relating to the contract are summarized below: 2021 $ 372,000 $1,899,00e 1,488,eee 524,000 318,eee 2022 Costs incurred during the year Estimated costs to complete as of 12/31 Billings during the year Cash collections during the year 2,336,800 2,542, 000 Required: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2021 and 2022 assuming Nortel recognizes revenue over time occording to percentege of completion. 2. Compute the amount of revenue and gross profit or loss to be recognized in 2021 and 2022 ssuming this project does not qualify for revenue recognition over time. 3. Prepare a partial balance sheet to show how the information related to this contract would be presented ot the end of 2021 assuming Nortel recognizes revenue over time according to percentege of completion. 4. Prepare a partial…
During 2019, Gulf Co. started a construction project with a total contract price of $3,500,000. Additional information is given below: 2019 2020 Actual costs incurred during the S1,350,000 S1,525,000 year Estimated remaining costs Billings to customers Collected from customers 1,350,000 1,200,000 2,300,000 1,000,000 2,400,000 What amount of gross profit should be recognized in 2020?
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On January 1, 2020, Miller Construction Company contracted to build a parking lot for the city of St. Louis for $825,000. The following transactions and estimates relate to this contract. Construction costs incurred during 2020 $440,000 Progress billings $209,000 Cash collections $192,500 $440,000 Estimated costs to complete a. Prepare the 2020 journal entry to record profit or loss assuming revenue is recognized over time. Note: Record any multiple debits in alphabetical order and any multiple credits in alphabetical order. a. Account b. To recognize revenues and expenses Account ◆ b. Prepare the 2020 journal entry to record profit or loss assuming revenue is recognized at a point in time. Note: If a journal entry (or a line of the journal entry) isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). To recognize revenues and expenses Debit ♦ Credit Debit Credit
jay
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
Advise the directors whether or not X Limited should have entered into the contract. Justifyyour answer.
Lark Corp. appropriately determined that each of its long-term projects represents a single performance obligation that is satisfied over time. At the end of the current year, Lark estimates that its costs to complete a project exceed the contract price, so that an overall loss on the contract is anticipated. Required: What journal entry will Lark record at the end of the current year, given the following information? • Revenue to date is $350,000 ($175,000 of which is to be recognized in the current year). • The expense recognized previously was $100,000. • An overall loss of $30,000 is anticipated
For 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 200,000
1. 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.

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