On January 1, 2017, Build Company entered intooilaconstruction contract withanownertobuildanrefinery.Thecontracthasthefollowingcharacteristics;theoilrefineryishighlycustomized totheowner'sspecifications and changes to these specifications by the owner are expectedThe oil refinery does not have an alternative use toNon-refundable, interim progress payments are required ascan cancel the contract at anytime (with a termination penalty); any work in process is the property of theAs a result, another entity would not need to re-perform the tasksover the contract term.the contractor.a.mechanism tofinance the contract.The ownerowner.performedcompletion of the contract.single performance obligationevidences suggests thattodate.PhysicalpossessionandtitledonotpassuntilThe contractor determines that the contract hasato build therefinery.The majority ofthe contractor's performance creates anis being transferredassetsthatthecustomercontrolsand controlovertime.Buildconcludes that input method (cost to cost method) instead of output method isreasonable method for measuring the progress toward satisfying itsa moreperformance obligation.duration is 3 years withestimated contractcost as of December 31, 2017 is P200M.includingrepresent/depict theThecontracttotalrevenueofP300M.The total estimated contractTheCostincurredduringyear2017as120MP20Mrelatedtocontractor-caused inefficiencies which donottransferof goods orservicestothe customer.As of December 31,2018, the totalestimatedcontractcostbecomes250Mduetoincreaseincostofrawmaterials.contractor-caused inefficiencies which doThe cost incurred during 2018 is P105M including P5M related tonot represent/depict thetransferof goods or services to the customer.Under IFRS 15, what isthe net income/(loss)for the years ended December 31, 2017 and 2018?to be reported by the company

Contract Duration: 3 Years Total estimated revenue= P30000,000 Estimated Cost as of December 31,…

Ôn January 1, 2017, Build Company entered into a construction contract with The build oil following refinery. refinery is an owner to an contract has the characteristics; the oil highly customized to the owner's specifications and changes to these specifications by the over the contract term. are expected The oil refinery does not have an alternative use to Non-refundable, interim progress payments are required as a can cancel the contract at any time (with a termination penalty); any work in process is the property of the another entity would not need to re-perform the tasks owner the contractor. mechanism to finance the contract. The owner owner. As a result, performed completion of the contract. single performance obligation to date. Physical possession and title do not pass until The contractor determines that the contract has to build the refinery. The majority of a

Ôn January 1, 2017, Build Company entered into a construction contract with The build oil following refinery. refinery is an owner to an contract has the characteristics; the oil highly customized to the owner's specifications and changes to these specifications by the over the contract term. are expected The oil refinery does not have an alternative use to Non-refundable, interim progress payments are required as a can cancel the contract at any time (with a termination penalty); any work in process is the property of the another entity would not need to re-perform the tasks owner the contractor. mechanism to finance the contract. The owner owner. As a result, performed completion of the contract. single performance obligation to date. Physical possession and title do not pass until The contractor determines that the contract has to build the refinery. The majority of a

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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A company incurred costs to fulfill a contract that has a four year life. The costs are a direct result of the contract and would not have been incurred had the contract not existed. how should the costs to fulfill the contract be accounted for?
X Co. and Y Co. entered into a contract where the latter agreed that the sugar cane which it will produce shall be milled by the former for a period of 30 years. It was stipulated that in case of any fortuitous event, the contract shall be suspended during said period. For four years duringthe last war and for two years after liberation when the mill of X Co. was being rebuilt, Y Co. failed to deliver its sugar cane to the central of X Co. After the expiration of the 30-yearperiod, Y Co. stopped the delivery of its sugarcane to the central of X Co. Subsequently, X Co. brought an action against Y Co. in order to compel the latter to deliver Sugarcane for six additional years on the ground that the fortuitous event had the effect of stopping the runningthe term or period agreed upon. Will the action prosper? Reasons
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. 550,000
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Crane Corporation uses the completed-contract method. At the end of the first year of a $9023000 contract, the following information is available: Costs to date: Estimated costs to complete Progress billings during the year Cash collected during the year $2021000 O $991000 O $247750 O $275000 O $0 6011000 1811000 1536000 In the first year, Crane should recognize gross profit of Crane Corporation uses the co information is available: Costs to date: Estimated costs to complete Progress billings during the y Cash collected during the yea In the first voor Crano should r Snipping Tool Screenshot copied t Select here to mark
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Sfundo Limited Sfundo Limited enters into a contract with Pro Tech Limited for the rental of a stall at the Midrand growth point hub. The commencement date of the lease is 1 January 2021 and the lease term is for five years. Sfundo Limited is permitted, subject to approval from Pro Tech Limited, to brand the stall and set up to suit their needs. Although the cost of branding is significant, The directors of Sfundo Limited decide to brand the stall as they are convinced this will bring in the business they require to be successful in the long term. The directors of Sfundo Limited believe that the location of the stall is strategic for business. The lease payments are R50 000 per year and are payable in arrears. The contract contains an option for Sfundo Limited to extend the contract for a further five years at the same rental, also payable in arrears. Commission and legal fees of R10 461 were incurred by Sfundo Limited and paid for in cash at the inception of the lease.A suitable…