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REVENUE

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › REVENUE

Viewing 9 posts - 1 through 9 (of 9 total)
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    Posts
  • October 1, 2022 at 12:32 am #667617
    Eunice03
    Participant
    • Topics: 88
    • Replies: 70
    • ☆☆

    MOBY
    During the year, Moby entered into a contract to construct an asset for a customer.
    The performance obligation is satisfied over time. The balance in the trial balance
    represents:
    Cost incurred to date $8 million
    Value of contract billed (work certified) and cash received $7 million
    The contract commenced on 1 October 20X2 and is for a fixed price of $25 million. The costs to complete the contract at 30 September 20X3 are estimated at $12 million.
    Moby’s policy is to measure progress based on the work certified as a percentage of
    the contract price

    SOLUTION
    Step 2 – Progress
    Percentage of completion is 40% (10,000/25,000)

    Good day,Please i don’t understand how 10,000 was gotten inorder to calculate the percentage of completion.I’ll appreciate if you can explain

    October 1, 2022 at 9:55 am #667639
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7079
    • ☆☆☆☆☆

    Hi,

    Sorry, not too sure on this one. Is the answer right? I’d be looking at the work certified to date of 7 million and dividing it by the total contract value of 25 million, especially given that it specifically states how they are to calculate the percentage complete.

    We can get to the 10 million by taking the 25 million and subtracting the 8 million costs to date and the 7 million of work certified, but I’ve not seen that used previously. Is there anything in the study text to suggest this as a valid method of working out the percentage complete?

    Thanks

    October 1, 2022 at 9:16 pm #667665
    Eunice03
    Participant
    • Topics: 88
    • Replies: 70
    • ☆☆

    I also made use of 7mill/25million when i was doing it on my own. I haven’t seen this method of calculating the percentage completed in the study text. Usually the work certified is outrightly given

    October 5, 2022 at 5:02 pm #667921
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7079
    • ☆☆☆☆☆

    So, I’d assume that it is an error unless somebody can point us in the right direction.

    Thanks

    October 10, 2022 at 1:17 pm #668228
    Eunice03
    Participant
    • Topics: 88
    • Replies: 70
    • ☆☆

    Thank you

    November 7, 2022 at 3:35 am #670809
    huiking
    Member
    • Topics: 6
    • Replies: 1
    • ☆

    hello,

    As the contract asset workings has been updated, may i know how to calculate the contract asset using the formula Revenue to date – invoice billed to date?

    Thanks

    November 10, 2022 at 7:26 pm #671206
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7079
    • ☆☆☆☆☆

    Hi,

    You take the revenue to date figure from your calculations in the SPL. The billings to date would have to be given in the question.

    Thanks

    April 18, 2024 at 7:10 pm #704271
    Sameena04
    Participant
    • Topics: 0
    • Replies: 1
    • ☆

    Sir I do understand how we get the 10 mil however why not use the work certified as given that is 7 mil in the question? it is mentioned in the question to use the work certified to measure progress
    Can you please clarify if there is any specific reason it is done so in the Question Moby

    April 20, 2024 at 6:54 am #704318
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7079
    • ☆☆☆☆☆

    I’d always use the work certified unless told otherwise. We’re still unsure of why they haven’t used it in the question.

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