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Hello Mr Chris
Cash flows from investing activities
Purchase of plant and equipment (note (ii)) (14,000)
Dividends received (W2) 300
Sale of investments (note (iv)) 1,600
Cash flows from financing activities
Redemption of loan notes (W5) (5,000)
Repayment of lease liability (2,300 + (1,500 – 570)) (W5) (3,230)why did they remove 570, when the actual cash paid was 1500?
Hello!
I have had some issues regarding output and input methods
In one example the cost of sales is taken as “costs to date”.Like in this oneOn 1 October 20X8 Pricewell entered into a contract to construct a bridge over a river.
The performance obligation will be satisfied over time. The agreed price of the bridge
is $50 million and construction was expected to be completed on 30 September 20Y0.
The $14.3 million in the trial balance is:
$000
Materials, labour and overheads 12,000
Specialist plant acquired 1 October 20X8 8,000
Payment from customer (5,700)
––––––
14,300
––––––
The sales value of the work done at 31 March 20X9 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 progress towards satisfaction of
the performance obligation on the outputs basis as determined by the agreed work to
date compared to the total contract priceAnswer for this question
Progress
Work completed to date has been agreed at $22 million so the contract is
44% complete ($22m/$50m).(iii) Statement of profit or loss
Revenue (44% × $50m) 22,000
Cost of sales: per TB 12,000
Plant depreciation (W4) 2,000
–––––– (14,000)
––––––
Profit to date 8,000And in another example where ouput method is applied, the cost of sales is the percentage(work certified) of total costs, not costs to date
Henley Co entered into a $10 million contract to build an asset for
a customer on 1 April 20X4. The contract is expected to take 2
years and a surveyor has assessed the value of work done as $4
million. The contract will cost $8 million and Henley Co has spent
$4 million to date. Henley Co measures progress towards
completion using an output method, comparing the work certified
to date to the total contract price.
What profit should Henley Co recognise for the year ending
31 December 20X4?Answer
$800,000 – Using the output method, the contract progress is
assessed at 40% ($4m/$10m). Therefore 40% of the revenue and
expenses should be recognised in the statement of profit or loss
during the year. This would give revenue of $4 million and cost of
sales of $3.2 million (40% of $8m), therefore giving a total profit of
$800,000.Why dont they use costs to date as cost of sales?
Hi did you get an answer for this question or were you able to understand it yourself?
Hello Sir! i have a problem with this part of the consolidation
I thought the company had RE for 1 april 20×2 of -4000 and they continued to make losses up until the date of acquisition on 1 october 20×2 worth -2000.
At the end of the year RE shows a figure of +8000. I thought that they had made a profit of 14 000 ( -4000 previous re -2000 up to 1 oct then for the second half +14000 so that re earnings shows a figure of 8000) But the answer in the book is 10 000. I have been confused by this part of the question. I would be extremely grateful if you helped me 🙂P S
Equity
Equity shares of $1 each 40,000 20,000
Retained earnings/(losses) – at 1 April 20X2 19,200 (4,000)*
– for year ended 31 March 20X3 7,400 8,000* note 1*note 1 At the date of acquisition, Strata produced a draft statement of profit or loss which
showed it had made a net loss after tax of $2 million at that date. Paradigm accepted
this figure as the basis for calculating the pre? and post?acquisition split of Strata’s
profit for the year ended 31 March 20X3.Answer at acquis. at report. post acq.
Retained earnings (6,000) 4,000 10,000