• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

Construction Contracts

Forums › Ask CIMA Tutor Forums › Ask CIMA F2 Tutor Forums › Construction Contracts

  • This topic has 4 replies, 2 voices, and was last updated 8 years ago by P2-D2.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • August 26, 2016 at 6:38 am #335246
    abz12
    Member
    • Topics: 46
    • Replies: 44
    • ☆☆

    Hi Sir, I watched the video you did on construction accounts. It was very good. I am stuck on a question. Please help.

    AE has a three year contract which commenced on 1 April 20X4. At 31 March 20X5, AE
    had the following balances in its ledger relating to the contract:
    $000 $000
    Total contract value 60,000
    Cost incurred up to 31 March 20X5:
    Attributable to work completed 21,000
    Inventory purchased for use in 20X5/6 3,000 24,000
    Progress payments received 25,000
    Other information:
    Expected further costs to completion 19,000

    At 31 March 20X5, the contract was certified as 50% complete

    Applying IAS 11 Construction contracts, what is the value of the work in progress and
    gross amounts due from customers that will be shown in the statement of financial
    position as at 31 March 20X5

    Work in progress Gross amounts due from customers
    A $17,000,000 $30,000
    B $ 2,500,000 $ 5,000
    C $24,000,000 $25,000
    D $21,000,000 $60,000

    my calculations

    So when calculating the gross amount due from customers- we do as per lectures:

    Profit (Total Level)= £60,000
    Less costs: 24,000+19,000=43,000
    profit= 17,000
    the contract was certified as 50% complete- 50% of 17,000= 8500

    SOFP

    Cost incurred to date= 24,000
    Profit/Loss= 8500
    less progress billings= -25,000
    total = 7500

    however this option is not in the answers. the booklet says B is the correct answer and I can not understand why? has it got something to do with the inventory purchased.. should I not have included it somewere in my calculation?

    The solution simply does 30,000-25,000=5,000.. it looks like it is doing 50% of the revenue – the progress payments.. this isn’t the way in the lectures.. is it a different method? surely both should get the same answer?

    Also how would you calculate the WIP?

    thanks

    August 26, 2016 at 5:35 pm #335380
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7156
    • ☆☆☆☆☆

    Hi,

    Have you got anymore detail from the answer given in your study materials? I’m not too sure I agree with the answer, although there could be more information in the question that I’m missing.

    Thanks

    August 26, 2016 at 7:13 pm #335425
    abz12
    Member
    • Topics: 46
    • Replies: 44
    • ☆☆

    Hi sir. yes. below is an extract.

    I am using Acron material.. to supplement my BPP questions booklet.

    Answer is B $2,500,000

    Compare the contract value and total expected costs, including foreseeable losses
    $’000

    Total contract price 60,000
    Costs incurred to date (24,000)
    Estimated costs to completion (19,000)
    Profit 17,000

    Income statement extracts $’000

    Revenue (50% x 60,000) 30,000
    Costs of sales (balancing figure) (21,500)
    Profit (50% x 17,000) 8,500

    Statement of financial position balances $’000

    Costs incurred to date 24,000
    Less transfers costs of sales (step 2) (21,500)
    Less foreseeable losses (0)
    WIP (current assets) 2,500

    Gross amounts due from customer (30,000 – 25,000)
    =5,000

    August 26, 2016 at 7:14 pm #335426
    abz12
    Member
    • Topics: 46
    • Replies: 44
    • ☆☆

    I have not seen a question asking for WIP or a solution calculating gross amount from customers the way acorn material has. I have posted the full question and answers. Hope you can help.

    August 30, 2016 at 9:14 pm #336395
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7156
    • ☆☆☆☆☆

    I’m with you in that I’ve never seen anybody split the figures on the SFP, however if you total the two figures in the Acorn answer (2,500 WIP + 5,000 due) then we get the answer that you calculated earlier, and I agree with you too on that calculation.

    One way to work it out would be to calculate the 7,500 as you’ve done above and then work out the difference between the revenue to date and progress billings as they’ve done, whihc gives us the 5,000. You can then calculate the WIP as the balancing figure between our 7,500 and the 5,000.

    Hope that helps. I genuinely doubt you would be asked to do this split but if you are at least you have a basic way to attempt it.

    Thanks

  • Author
    Posts
Viewing 5 posts - 1 through 5 (of 5 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • hana1992 on Foreign exchange risk management (2) Part 1 – ACCA (AFM) lectures
  • John Moffat on Overcapitalisation and Overtrading – ACCA Financial Management (FM)
  • ISABIRYEZA on Overcapitalisation and Overtrading – ACCA Financial Management (FM)
  • ISABIRYEZA on Overcapitalisation and Overtrading – ACCA Financial Management (FM)
  • huunghia18499 on Foreign currency- Functional currency – ACCA (SBR) lectures

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in