ZEN Ltd signs a contract on 30 June 2019, agreeing to build a bridge for XYN at a contractprice of $20 million. XYN will be in control of the asset throughout the construction process.ZEN estimates that construction costs will be as follows:Year Ending30th June 2020Cost$ 5,000,000$ 8,000,000$ 3,000,000$16,000,00030th June 202130th June 2022TotalThe contract provides that XYN will make payments on 30 June of each year as follows:$ 4,000,000$ 10,000,000$ 6,000,000$20,000,000202020212022TotalThe contract is completed as expected on 30 June 2022. Assume that actual costs and cashcollections with expectations and that cost (an input measure) is used as the basis for assessingprogress on the car contract.Required:(a) Calculate the income and gross profit recognised each year 2020, 2021, 2022.(b) Prepare the journal entries for the year ended 30th June 2020.

Cost as basis for assessing progress:- In this approach, the percentage of completion is based on…

ZEN Ltd signs a contract on 30 June 2019, agreeing to build a bridge for XYN at a contract price of $20 million. XYN will be in control of the asset throughout the construction process. ZEN estimates that construction costs will be as follows: Year Ending 30th June 2020 30th June 2021 Cost $ 5,000,000 $ 8,000,000 $ 3,000,000 $16,000,000 30th June 2022 Total The contract provides that XYN will make payments on 30 June of each year as follows: $ 4,000,000 S 10,000,000 $ 6,000,000 $20,000,000 2020 2021 2022 Total The contract is completed as expected on 30 June 2022. Assume that actual costs and cash collections with expectations and that cost (an input measure) is used as the basis for assessing progress on the car contract. Required: (a) Calculate the income and gross profit recognised each year 2020, 2021, 2022. (b) Prepare the journal entries for the year ended 30th June 2020.

ZEN Ltd signs a contract on 30 June 2019, agreeing to build a bridge for XYN at a contract price of $20 million. XYN will be in control of the asset throughout the construction process. ZEN estimates that construction costs will be as follows: Year Ending 30th June 2020 30th June 2021 Cost $ 5,000,000 $ 8,000,000 $ 3,000,000 $16,000,000 30th June 2022 Total The contract provides that XYN will make payments on 30 June of each year as follows: $ 4,000,000 S 10,000,000 $ 6,000,000 $20,000,000 2020 2021 2022 Total The contract is completed as expected on 30 June 2022. Assume that actual costs and cash collections with expectations and that cost (an input measure) is used as the basis for assessing progress on the car contract. Required: (a) Calculate the income and gross profit recognised each year 2020, 2021, 2022. (b) Prepare the journal entries for the year ended 30th June 2020.

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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