Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Bridgenorth Co in Bpp
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- March 3, 2021 at 1:59 am #612873
Bridgenorth has undertaken a $5million contract to repair a railway tunnel.The contract was signed in 1 April 20X8 and the work is expected to take two years.This is a contract where performance obligations are satisfied over time and progress in satisfying performance obligations is to be measured according to % of work completed as certified by a surveyor. Bridgenorth has an enforceable right to payment for performance completed to date
At 31 December 20×9 the details of the contract were as follows
—————————————————–20X9———20X8
Total contract price—————————5000——–5000
cost to date————————————3600——–2300
estimated cost to completion————–700———2100
work invoiced———————————3000——–2000
cash received——————————–2400——–1500
%certified complete————————–75%——40%What is the contract asset to be recognised at 31 December 2019 ?
Answer: Cost to date: 3600
Profit to date: 525 (5000-400)*0.75
Amounts invoiced: (3000)Asset = 1125
But in similar situations almost all solutions were: Revenue to date: 5000*0.75 = 3750
Amounts invoiced: (3000)So what is the calculations based on ? I though it was recognition basis (Output vs Input method), but apparently not.
March 6, 2021 at 8:23 am #613695Hi,
Is this not an old question and the answer you have is under the older rules for accounting for this type of transaction?
Thanks
March 8, 2021 at 12:40 pm #613937Hello,
Well question is from the latest BPP book (Sep. 20 – Jun. 21), maybe they have not updated answers.
March 13, 2021 at 7:34 am #614327That’s odd as we now look at revenue recognised less amounts invoiced.
Thanks
March 14, 2021 at 5:14 am #614376Dear sir the answer for questions Haverford Co (Mar/June 2018) applied the old method.And your lecturer for revision this question applied the old method also.What method should we apply for exam June 2021?Thank you
March 17, 2021 at 7:36 pm #614632I’d apply the updated method.
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