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- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
MikeLittle.
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- March 24, 2018 at 4:03 am #443651
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)1.28mMarch 24, 2018 at 7:55 am #443654In 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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