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  1. avatar says

    Hello all,

    I am a bit stuck with an example from BPP revision kit – question 52 (preparation question: contract). The year start on Jan 1 and end on Dec 31. Most of the contracts in this question start during the year. I thought that revenue and costs should be calculated with the percentage of completion, but also the number of months. They say in the question that profit accrues evenly over the contract.

    E.g. revenue for a contract of 120,000 $ started on July 01 and with completion percentage of 45 % would be: 120,000 $ x 45 % x 6 month

    However, they take the full revenue in the solution: 120,000 $ x 45 %.

    What is correct and why should we take the full revenue if the contract started mid-year?

    Thanks,

    Dimitri

    • Profile photo of MikeLittle says

      It’s 45% complete – it’s not 45% complete for half a year

      How can you time apportion 45% complete? That’s illogical

      If you start a project on 1 October and finish it on 31 December, does that mean you should time apportion it by multiplying by 3 months / 12 months?

  2. Profile photo of shalinivv says

    http://www.answers.com/Q/What_happened_to_the_boring_machines_used_to_build_the_Chunnel

    What happened to the boring machines used to build the Chunnel?
    In late 1990, the service tunnel was almost complete. The moles had approached each other closer to the British end. France, however, didn’t gloat in its accomplishments. Both countries had come together for a common good. This isn’t to say that some friendly competition hadn’t fueled the tunnel’s construction. When the two tunnel boring machines were about 50 meters from each other, the English moles drove off-line to the right into the narrow gap between the service tunnel and the running tunnel south (Fetherston, p. 342). The British machine stopped once it lay parallel and head to tail with the French machine. The English mole was stripped of anything salvageable. It was then entombed within concrete. The French tunneling machine than was hollowed out. Its outer shell would serve as the tunnel lining. Two workers, one from each side, were chosen at random to be the first to cross over from their respective tunnels and into the other. On December 1, 1990, British construction worker Graham Fagg and his French counterpart, Philippe Cozette, each with an air spade, drilled through the final piece of rock which stood between them (See Appendix C). Once the hole grew big enough, Cozette poked his head through to a frenzy of photographers, reporters, and a small handful of privileged spectators. Fagg repeated Cozette’s actions to the French side. News soon spread across the world. The United Kingdom and France were now linked for the first time in 8,000 years (Guterl, p. 25). This gala event had come at the objection of TML. They felt as though the tunnel was already over budget, and the last thing Eurotunnel needed to do was celebrate. This single event, however, did appease skeptical investors in the project.

    I just wanted to find out what happened to the machines lol! This is what i found on the web.

    • Profile photo of MikeLittle says

      !!!!!

      Being English, I prefer the story that says the French machine was buried!

      I still don’t understand why the British machine could not come back in line and exit into France (or even dig a U turn and come back to England)

  3. Profile photo of Swati says

    Dear Sir,

    I have a small confusion about when to start charging the depreciation? Its a June 2013 Dipifr question:

    The question says:
    Construction work commenced on 1 November 2012. The factory was completed on 31 May 2013 and production began on 1 August 2013. The overall useful life of the factory building was estimated at 40 years from the date of completion. Year ends on 30 Sept 2013.
    And the Total depreciable amount came out to be $ 10,000

    In the solutions, they have charged it for 4 months ( I think its 1st June to 30 Sept 2013)

    But shouldn’t it be charged when the ‘production’ has begun i.e from 1st August 2013 (means 2 months?). Doesnt it mean it was ready for use from 1st August 2013?

    Regards,
    Swati

    • Profile photo of MikeLittle says

      I presume the cost of the factory was $1,200,000 – you never said!

      From the information you have given I can understand why you would wish to depreciate for only 2 months. That COULD be acceptable if you were to charge 2 months out of a remaining useful life of 39 years 10 months

      The factory is complete as at the end of May and from that time it has “a useful life of 40 years”. The question does NOT say that it has “a useful productive life of 40 years”

      Nasty trick :-(

      • Profile photo of Swati says

        Ahh okay.. i understood.. Thanks!

        And by writing ‘Total depreciable amount came out to be $ 10,000′, i meant that the total factory cost worked out to be 10,000 on which depreciation was charged in the solutions.. Well, i understood how they got this ‘10,000’ :)

        So, thanks once again!

  4. Profile photo of uzo2011 says

    Dear sir,
    I’m finding it difficult to watch F7 lectures on my tablet, it is displaying Error loading skin: Error loading file for the past 2 days. I’ve watched open tuition lectures from my tablet in the past. So I don’t know what’s happen now. Can you please help me out

    Thanks,
    Uzo

    • Profile photo of MikeLittle says

      Hi Tarek – I’m sure that this is explained in the lecture! However ……. “amount invoiced” is the amount which the builder has received together with those amounts which the builder has invoiced but has not yet received (ie still included in “receivables””

      “Amounts due from customers” in W2 is another way of saying “Unbilled work in progress” whereas “Amounts due from customers” in W3 is another way of describing “Accounts receivable”

      The two amounts described as “Amounts due from customers” are therefore different in nature – the first is work-in-progress / stock / inventory whilst the second is receivables

      OK?

      • avatar says

        yes ok thanks mr mikle

        please mr mikle i want you advise me what i use in my rivision kit in f7 that meet our method in opentuition kaplan or bpp ?

    • Profile photo of MikeLittle says

      In any of those … and why have you missed off questions 4 and 5?

      Any of those topics could be involved in any of the five questions

      Sorry, but there’s no short cut to passing these exams – just ask some of the students who finished their exam session last Wednesday

  5. avatar says

    hi,
    I have a school exam on the day of the ACCA exam, if i decide not to write the exam, would ACCA keep a spot for the june 2014 due to the fact that i paid for a sit in this december exam?

  6. avatar says

    Hi, this is relating to the example 1 Tomas and Iveta.
    In it 300k is earned if 60% of the work is completed by the end of year 2.
    In part (a) one outcome is 63%. So Tomas can get the 300k extra in the first year. But in the second year ( part b) the stage of completion is 68%. But in the solution 300k is again added. Isn’t the 300k an oneoff payment? Isn’t recognising 300k again, is exagerating revenue?

    • Profile photo of MikeLittle says

      @dimuthu1234, Hi

      I seem to remember that the revenue figure is intended to be the cumulative amount to be recognised. To arrive at the figure for revenue for the second year, you need to take the accumulated figure for the end of year two and deduct from that the figure as at the end of year one.

      In that way, you’ll see that the 300,000 is included in only one Statement of Income

      • Profile photo of MikeLittle says

        @MikeLittle, Is this the question involving Tomas and Ivets? The $300,000 on that question is the agreed element of the contract in the situation that the contract was at least 60% complete by the end of year two. In that part of the answer, it starts with the assumption that the contract was 65% complete.

        However, it must be remembered that both revenue and costs at the end of year two are cumulative and, for the purposes of the Statement of Income, both those line items need to be reduced by the amount recognised in year 1. Thus, if the revenue to be recognised by the end of year 2 were ( 65% * 1,000,000 ) + 100% * $300,000 bonus … so $950,000, and suppose the revenue recognised in year 1 Statement of Income had been $270,000, the revenue to be recognised in year 2 is $950,000 – $270,000 = $680,000

  7. Profile photo of acuteacca says

    lectures are not working why you are using a video hosting server simply host file in root directory of server we are facing problems in lectures please do something admin……………………….

      • Profile photo of MikeLittle says

        @MikeLittle, ok, “to straddle” has a number of dictionary definitions included amongst which are these two:-

        a) to stand, walk or sit with the legs apart

        b) to spread the legs apart

        Right – hold that image in your mind. In the context of a contract which “straddles” two or more accounting periods, the verb suggests that some part ( may be, or may be not, a half ) lies within one accounting period and the rest ( or part of the rest ) lies within subsequent accounting periods.

        Does that answer your straddle query?

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