# ACCA F7 Exam Question 2 Dune (June 2010)

1. says

Hello,

I have a question regarding the way revenue and receivables from the construction contract are recognised.
We have \$12000 in Revenue which goes into Profit & Loss, and yet the amount recorded in Receivables is \$13400. I understand the basis for calculations however, where exactly is the rest of \$1400 in the SOFP?

Why revenue is credited by 12000 (40000*30%), and the receivables debited by \$1400 more, \$13400 (11000 materials and labour +3000 depreciation). Why isnt the same basis for calculation used in both cases, revenue and receivables? Again, the SOPA is balanced, yet how, where’s the \$1400.

Thank you

• says

I managed to figure it out..

Dr: Assets 9000
Amount due (bal.fig.) 13400
Cr: Construction contract (per tb) 20000 (-)
Ret earning (profit) 2400 (+)

Hopefully I got it right.. wasn’t complicated after all

2. says

Good evening. Probably a silly question but in case of Dune point 4- goods with cost of \$6m have been invoiced to customers at a gross profit of 25% on sales… If we use here PUP calculation, it would be 25/100*6m= \$1.5m profit. If I add cost of \$6m plus profit of \$1.5m, sales come to \$7.5m as opposed to \$8m. Why is that? Thanks

• says

@gabikar, Because if they are invoiced at a gross profit of 25% on sales, that means that the cost of the goods is 75% of the transfer price ie 75% of the value invoiced to the buying company.

Try it! If your 1.5 was correct, the gross profit would be 1.5/7.5 = only 20%

But if you put 2 as the profit, the pup fraction becomes 2 / 8 = 25%

3. says