Contract

If the year end is 30 September, that’s a “non-question” – you should have told me what the accounting date is

In addition, there is the basic principle that no profits are recognised until the contract is sufficiently progressed to be able to predict with reasonable certainty the ultimate outcome, and it’s VERY debatable that 10% completion is sufficient

IF we accept that 10% IS sufficient progress, then 10% of revenue will be $7,200 and 10% of total costs will be $6,200

But it’s a poor question (or you haven’t given me full information!)

I’ve told you the answer! If 10% is enough to predict with reasonable certainty, then revenue recognised will be $7,200 and costs recognised will be $6,200

If 10% isn’t enough to predict with reasonable certainty, then revenue recognised will be $7,200 and costs recognised will also be $7,200

“It’s 25% completed to be to be considered” – do you mean that the question actually tells you that the contract has to be at least 25% complete before any profit should be recognised?

Is that what this line of yours means?

THEN WHY DIDN’T YOU TELL ME THAT, EITHER IN YOUR ORIGINAL QUESTION OR AFTER MY FIRST RESPONSE? :-(((

Because we’re only at 10%, no profit should be recognised

My answer of $7,200 revenue and $7,200 costs recognises no profits

BPP answer of $8,000 revenue and $8,000 costs recognises no profits

My answer leaves me with an $800 “asset” of costs incurred, not yet recognised

BPP answer leaves them with revenue of $800 recognised in excess of 10% of the contract value

I wouldn’t like to say which is more correct (or more incorrect!)