Entity A is a construction company listed in Hong Kong. To maintain consistency, it always recognises progress based on work certified over total contract value. For a long-term contract, Entity A will satisfy the performance obligation over time. In the year to 30 June 2020, Entity A had recognised revenue of $15,000,000 and a profit of $3,750,000 in respect of this contract. The following information relates to one of its long-term contracts on 30 June 2021. Contract price = $50,000,000 Costs incurred to date = $32,500,000 Estimated cost to complete = $5,200,000 Invoiced to customer = $30,000,000 Work certified to date = $42,500,000 The end of the reporting period is 30 June.
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Entity A is a construction company listed in Hong Kong.
To maintain consistency, it always recognises progress based on work certified over total contract value. For a long-term contract, Entity A will satisfy the performance obligation over time.
In the year to 30 June 2020, Entity A had recognised revenue of $15,000,000 and a profit of $3,750,000 in respect of this contract.
The following information relates to one of its long-term contracts on 30 June 2021.
- Contract price = $50,000,000
- Costs incurred to date = $32,500,000
- Estimated cost to complete = $5,200,000
- Invoiced to customer = $30,000,000
- Work certified to date = $42,500,000
The end of the reporting period is 30 June.
REQUIRED:
What profit should appear in Entity A’s Statement of Profit or Loss as for the period ended 30 June 2021 in respect of this contract?
ANSWER:
Contract profit =
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