FRJune 2011 Q5

This question is extracted from F7 June 2011 Q5 Please kindly advise how to solve the questions. Thank you. On 1 October 2009 Mocca entered into a construction contract that was expected to take 27 months and therefore be completed on 31 December 2011. Details of the contract are: $’000 Agreed contract price 12,500 Estimated total cost of contract (excluding plant) 5,500 Plant for use on the contract was purchased on 1 January 2010 (three months into the contract as it was not required at the start) at a cost of $8 million. The plant has a four-year life and after two years, when the contract is complete, it will be transferred to another contract at its carrying amount. Annual depreciation is calculated using the straight-line method (assuming a nil residual value) and charged to the contract on a monthly basis at 1/12 of the annual charge. The correctly reported income statement results for the contract for the year ended 31 March 2010 were: $’000 Revenue recognised 3,500 Contract expenses recognised (2,660) ––––––– Profit recognised 840 ––––––– Details of the progress of the contract at 31 March 2011 are: $’000 Contract costs incurred to date (excluding depreciation) 4,800 Agreed value of work completed and billed to date 8,125 Total cash received to date (payments on account) 7,725 The percentage of completion is calculated as the agreed value of work completed as a percentage of the agreed contract price. Required: Calculate the amounts which would appear in the income statement and statement of financial position of Mocca,including the disclosure note of amounts.