Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Martac – Revenue contract over time
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- June 24, 2020 at 12:20 pm #574612
Martac Construction is building a new shopping centre for $220m. This is a contract whereby performance obligations are satisfied over time. satisfaction of performance obligations is measured by certificates of % completion. At the end of the first year the contract had been 60% completed at a cost of $90m and invoices to customer of $100m had been received. It is estimated that the contract will cost a further $80m to complete.
What figure should Martac show on sofp at end of year one under contract assets?
I had answered $20m = but the correct answer was $32m
my workings were:-
Contract 220,000
costs to date -90,000
costs to complete -80,000
expected profit 50,000p&L
Revenue (220*60%) 132,000
COS (90+80)*60% -102,000
Profit 30,000sofp
costs to date 90,000
profit 30,000
invoiced -100,000
contract asset 20,000 sofp current assetbut they have done receivables
Revenue 132,000
invoiced -100,000
receivables 32,000Where am i going wrong here? i thought they just wanted the asset figure?
June 25, 2020 at 11:26 am #574660Also stuck on this similar question. i am obviously missing something from my learning – please can someone help. many thanks in advance.
Martac Construction is constructing a law court complex at a fixed price of $70m
This is a contract where performance obligations are satisfied over time. Unfortunately at the end of year 1 cost incurred were $40m but the contract was only 50% complete.
£20m had been invoiced. It is expected that costs will have risen to $85 by completion date.What figure should Martac show under current assets on sofp at end of year 1?
My workings were:-
contract price 70000
costs to date -40000
costs to complete -45000
expected loss -15000P&L
Revenue (70*50%) 35000
COS (bal) -50000
Loss -15000SOFP
Loss -15000
actual costs 40000
invoiced -20000
contract asset 5000SOFP
current assets
contract asset 5000
receivables (70-20) 50000ANSWER was $15000
revenue 70*50% 35000
invoiced -20000
asset 15000June 27, 2020 at 4:00 pm #574815@anniebabe said:
Martac Construction is building a new shopping centre for $220m. This is a contract whereby performance obligations are satisfied over time. satisfaction of performance obligations is measured by certificates of % completion. At the end of the first year the contract had been 60% completed at a cost of $90m and invoices to customer of $100m had been received. It is estimated that the contract will cost a further $80m to complete.What figure should Martac show on sofp at end of year one under contract assets?
I had answered $20m = but the correct answer was $32m
my workings were:-
Contract 220,000
costs to date -90,000
costs to complete -80,000
expected profit 50,000p&L
Revenue (220*60%) 132,000
COS (90+80)*60% -102,000
Profit 30,000sofp
costs to date 90,000
profit 30,000
invoiced -100,000
contract asset 20,000 sofp current assetbut they have done receivables
Revenue 132,000
invoiced -100,000
receivables 32,000Where am i going wrong here? i thought they just wanted the asset figure?
What you have done is correct. The standard allows alternative treatments and is not prescriptive about what has to e done on the SFP, hence the different treatment/answer.
June 27, 2020 at 4:01 pm #574816@anniebabe said:
Also stuck on this similar question. i am obviously missing something from my learning – please can someone help. many thanks in advance.Martac Construction is constructing a law court complex at a fixed price of $70m
This is a contract where performance obligations are satisfied over time. Unfortunately at the end of year 1 cost incurred were $40m but the contract was only 50% complete.
£20m had been invoiced. It is expected that costs will have risen to $85 by completion date.What figure should Martac show under current assets on sofp at end of year 1?
My workings were:-
contract price 70000
costs to date -40000
costs to complete -45000
expected loss -15000P&L
Revenue (70*50%) 35000
COS (bal) -50000
Loss -15000SOFP
Loss -15000
actual costs 40000
invoiced -20000
contract asset 5000SOFP
current assets
contract asset 5000
receivables (70-20) 50000ANSWER was $15000
revenue 70*50% 35000
invoiced -20000
asset 15000This is the same as in the previous question. What you have done is correct but there are alternative treatment.
June 27, 2020 at 8:32 pm #574828ok thanks for clearing that up, was beginning to think i had seriously missed something.
have a good weekend.July 11, 2020 at 9:19 am #576550Thanks, you too!
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