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Hi sir, I have a question I found online
The trial balance of Sherlock Co. had a contract asset of $15 million which comprised of contract costs incurred at 31 March 20X8 of $45 million less a payment of $30 million from the customer. The agreed transaction price for the total contract is $90 million and the total expected costs are $72 million. Sherlock Co uses an input method based on costs incurred to date relative to the total expected costs to determine the progress towards completion of its contracts. Sherlock Co. has sent invoices of $40 million to its customer for the work done to date.
What I was able to solve was that I think the
input method used the %age would be 45000/72000 * 100 = 62.5%?
So do you think I have calculated the %age correctly?Or is it that we work backwards from the Contract Asset being $15m Billings being $30m but what would the profit be?
@tasbihak said:
Hi sir, I have a question I found onlineThe trial balance of Sherlock Co. had a contract asset of $15 million which comprised of contract costs incurred at 31 March 20X8 of $45 million less a payment of $30 million from the customer. The agreed transaction price for the total contract is $90 million and the total expected costs are $72 million. Sherlock Co uses an input method based on costs incurred to date relative to the total expected costs to determine the progress towards completion of its contracts. Sherlock Co. has sent invoices of $40 million to its customer for the work done to date.
What I was able to solve was that I think the
input method used the %age would be 45000/72000 * 100 = 62.5%?
So do you think I have calculated the %age correctly?Hi,
Yes the input method looks at the costs incurred relative to the total costs that we expect to be incurred.
Thanks
@tasbihak said:
Or is it that we work backwards from the Contract Asset being $15m Billings being $30m but what would the profit be?Hi,
The profit is calculated by applying the percentage complete to the total contract profit. The total contract profit is the total contract price less the total costs expected to be incurred.
Thanks
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