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Dear Mike,
There is a questions about Revenue recognition which I did not understand the answer.
Could you kindly guide me toward the answer?
Apologies for the long writing.Yling entered into a contract in respect of which performance obligations are satisfied over time on 1 January 20×4. The contract is expected to last 24 months. The price which has been agreed for the contract is $5M. At 30 September 20×4 the costs incurred on the contract were $1.6M and the estimated remaining costs to complete were $ 2.4M
On 20 September 20×4 Yling received a payment from the customer of $1.8M which was equal to the total of the amounts invoiced. Yling calculates the stage of completion of its performance obligations on contracts on the basis of amounts invoice to the contract priceWhat amount would be reported in Yling’s statement of financial position as at 30 September 20×4 as the contract asset arising from the above contract?
Answer:
Amount invoice (1800)
Cost of sale 1600
Profit to date 360Working profit to date
Expected profit (5-(2.4+1.6) = 1M
Profit to date (1M * (1.8/5) = 0.36M1. What is the contract asset?
2. Why the amount invoiced is deducted?Sorry but I don’t know and understand the question.
Could you please help me?
Thanks and Regards
Gabriella
You need to work through the examples in chapter 13 of the course notes – they cover this example perfectly
The question “What amount would be reported in Yling’s statement of financial position as at 30 September 20×4 as the contract asset arising from the above contract?” in fact is not answered in your post and should be $3.4
Go through chapter 13 quickly for yourself and then, if you still have a problem, post again
Dear Mike,
Just to let you know, I watched the lecture and the question became easy. Thanks
Gabbi
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