Contract assets

Dear Tutor,

I would like to ask about contract assets and the two different ways of calculating them. How would I know which one to use in any situation? I’ve solved both of them with their different ways and came to different amounts. The questions bellow each one uses a different calculation. The solutions are from the exam kit.

1st Question
Co entered into a contract expected to last 24 months on 01.01.20X4. Fixed price of contract is $5M. At 30.09.20X4 costs incurred on the contract were $1.6M and estimated remaining costs are $2.4M. On 20.09.20X4 Co received from the customer a payment of $1.74M which is equal to total of amounts invoiced. Co calculates completion based on the percentage of the project certified as completed. At 30.09.20X4, the % certified as completed to date was 38%.

What amount should be reported at 30.09.20X4 as Contract Asset?
The solution given is
000
Revenue recognized to date(5m x 38%) 1,900
Less amounts invoiced (1,740)
Contract asset 160

2nd Question

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
—————————————————–20×9———-x0x8
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 31/12/20X9?

The solution given is

Costs to date 3.600.000
Profit to date (5,000,000-4,300,000 X 75%) 525,000
4,125,000
Less amounts invoiced (3,000,000)
Contract asset 1,125,000