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Hi please could you advise;
Chapter 13 – Example 5.In answers, General Costs are $ 750,000. (For year 2)
How is this arrived at? I only get it to $ 715,000 ??My workings:
Costs to Date 500,000
Estimated to completion 600,000
————
1,100,000 @ 65% = 715,000Any help much appreciated
Hi
If you look at the figures for the end of year two, you may notice that the contract is now forecast to make an overall loss. In the situation of a forecast loss, the entire loss should be recognised as soon as it is anticipated. So, instead of calculating revenue recognised and cost recognised ( therefore giving profit recognised ), we have to calculate revenue recognised ( in the normal way ) but then put the projected loss in the “Profit recognised” third line. That then means that costs to be recognised must be the “missing” figure.
Does that help?
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