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P2-D2.
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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Bridgenorth Co in Bpp
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.
Hi,
Is this not an old question and the answer you have is under the older rules for accounting for this type of transaction?
Thanks
Hello,
Well question is from the latest BPP book (Sep. 20 – Jun. 21), maybe they have not updated answers.
That’s odd as we now look at revenue recognised less amounts invoiced.
Thanks
Dear 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
I’d apply the updated method.