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Hi mike
I have seen a few different treatments and maybe I am not putting it together correctly.
In the MCQ revision mock exam there is a question, ” Anges entered.. Contract price 20m…costs 4m..plus est to compl 12m..in addition an item of plant for exclusive use on the contract for $1m.uel =2years (so depreciation is 125, 3 months to year end.)
Invoiced and recd was 7m…the stage of completion basis is progress billing as proportion of contract price.( I took that as 7/20=35%)My version:
Income statement
Rev 35%x20m = 7m
Costs 35%x (4+12+1)=5.95m
Attrib profit 1.05m
-depreciation 0.125
=925Contract liab
Costs 4+0.125=4.125m
+Attrib profit. 925
-Invoiced 7
=-1.95..This gave none of the answers!… So I took out the plant..
Rev 35%x20=7
Costs 35%x(4+12)=5.6
Attrib prof =1.4
-depr 0.125
=1.275Costs 4+.125=4.125
+Attrib pr =1.275
=5.4
-inv 7
=-1.6Which gave me the right answer according to the MCQ tests , is this working correct do you think ?
Cheers
Hugh
I used Kaplan to get the working format.
First I got the total profit for the whole project:
Revenue:20M
Less:Total Costs: (16M)
Profit: 4MThen I got the attributable profit for the period:
As per the question the stage of completion basis is progress billing as proportion of contract price.( I took that as 7/20=35%). This is correct.
35% of 4M=1.4M
So from here I proceeded to prepare the income statement:
Sales(Bal. figure):5.4M
Costs for the period:(4M)
Profit for the period: 1.4M(as above)Then to get the SFP figures:
Costs incurred to date: 4M
Profit for the period: 1.4
Progress payment: (7M)
Due to Customer: (1.6)-LiabilityWhy would you not take 35% of 20 for the revenue figure, 35% of total costs and that would give you 35% of the profit?
Revenue. 7.0
Costs. 5.6
Profit. 1.4Eller, please restrict your input to the general forum
Thanks
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