On 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 P12. The remodeling and the installation are treated as a single performance obligation satisfied over time. The expected contracts costs are as follows: Generator 4,000,000 Other costs 5,000,000 Expected total contract costs 9,000,000 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 P6,000,000 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 (i.e., 4M ÷ 9M = 44.44%). Although ABC Co. acted as a principal in procuring the generator, ABC Co. is not involved in designing or manufacturing the generator. The profit in 20x1 is

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

On 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 P12. The remodeling and the installation are treated as a single performance obligation satisfied over time. The expected contracts costs are as follows: Generator 4,000,000 Other costs 5,000,000 Expected total contract costs 9,000,000 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 P6,000,000 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 (i.e., 4M ÷ 9M = 44.44%). Although ABC Co. acted as a principal in procuring the generator, ABC Co. is not involved in designing or manufacturing the generator. The profit in 20x1 is

Expert Solution

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions