Revenue

Hi My dear Tutor. I have a question relating to the below question

Trial balance at 31 march 2017

on 1 October 2013 Pricewell entered into a contract to construct a bridge over a river. The
agreed price of the bridge is $50 million and construction was expected to be completed on 30
September 2015. The $14•3 million in the trial balance is:

materials, labour and overheads 12,000
specialist plant acquired 1 October 2013 8,000
payment from customer (5,700)
––––––
14,300
The sales value of the work done at 31 March 2014 has been agreed at $22 million and the estimated cost to complete (excluding plant depreciation) is $10 million. The specialist plant will have no residual value at the end of the contract and should be depreciated on a monthly basis. Pricewell recognises profits on uncompleted contracts on the percentage of completion basis as determined by the agreed work to date compared to the total contract price

Solution

cost to 31 march 20×7
material-12000
depreciation(8000/24*6)-2000
overall-14000

estimated cost excluding depreciation-10000
depreciation-6000
16000

from 1 october 20×6 to 30 september 20×8 24 month
from 1 october 20×6 to 31 march 20×7-6months-2000
from 31 march 20×7 to 30 september 20×8-18mosths-6000

percentage complete 22000/50000*100%=44%

under p/l

revenue(50000*44%)=22000
cost of sales(16000+14000*44%)-13200
gross profit-8800

under SFTP

profit recognised-8800
cash recevived-5700
trade recevivable-17100

Sometimes I face instead of trade receivables there is written contract asset.Also trade receivable and Work in progress together creates contract asset such as contract assett =work in progress +trade receivable

this part slightly unclear for me could you explain it on this example?
WHat is work in progress?