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Hello, i want to ask about question on how to deal with the amount of due from customer since the progress billing is being accounted in trade receivables and revenue?
Here the full question:During the year , Navigator entered into a contract to build a substantial item of plant for a specific customer , due for completion in early 20X4. The amounts of ‘ Construction contract work in progress’ of $8800 represents costs incurred on the contract up to the year end date. Others details of the contract are as follow:
Fixed contract price:$33500
Estimated future spend at 30 September 20X3:$13200
Invoices issued to 30 September 20X3:$9800
Invoices paid at 30 September 20X3: $7200Invoices issued have been recorded in revenue and trade receivables. Other than the invoices and accounting for cash payments and receipts for cost incurred and invoices settled, no other entries have been made in respect of this contract. Navigator calculates the stage of completion on the ‘cost’ basis.
Are we agreed that the contract is 40% complete? 8,800/(13,200 + 8,800) x 100
Ok, working W1
Revenue recognised 40% x 33,500 = 13,400
Costs recognised 40% x (8,800 + 13,200) = 8,800
Therefore profit recognised is 4,600
Working W2
Costs to date 8,800
Attributable profit 4,600
Less amounts invoiced 9,800
Amounts due from customers 3,600 (unbilled work in progress)
Working W3
Amounts invoiced 9,800
Less amounts received 7,200
Amounts due from customers 2,600 accounts receivable
Is that better?
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