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Regarding to the following questions: as you mentioned in the last post depreciation of idle ppe is not included in contract cost and it is fall under different expense category. May I knw it will fall under which category?
Puglia Plc is constructing a skyscraper in the heart of town and has signed a fixed price three- year contract for $21m with the local authorities. It has incurred the following cost relating to the contract by the end of first year:
Material cost=5m
Labour cost=2m
Construction overhead=2m
Marketing costs=0.5m
Depreciation of idle ppe=0.5mAt the end of the first year, it has estimated costs to complete the contract as 9m. The company recognises revenue, costs and profits on a costs basis.
What profit or loss from the contract should Puglia Plc recognise at the end of the first year?
a)1.5m
b) 1.0m
c) 1.05m
d)1.28mIn the category in which other depreciation not related to the contract is included
It could be “cost of sales” or even “administrative costs” – each separate entity will have chosen their own expense account into which depreciation should be debited – so far as I am aware there is no one individual specified account title into which depreciation is expensed
Why have you repeated the question Puglia? I have already explained in my previous response why I believe the answer should be $1.5
OK?
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