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Sir im stuck in this question and need some help. ill start from beginning.
first we calculate % of work completion based on value. and i calculated it 65%.
then 2nd step estimated profit. which is calculated as:
‘000’
SALE PRICE OF CONTRACT : 12500
LESS COST TO DATE 4800
FURTHER COST 5500-4800= 700
DEPRECIATION = 4000
TOTAL COST TO DATE = (9000)
PROFIT= 3000now in this step my question is why cannot we simply take ” estimated total cost of contract which is 5500 and add depreciation amount of 4000 and we still get 9000? or do we have to show further cost? also why we are not multiplying the profit figure with the % of work completion? 3000 X 65%? why we take full amount of 3000?
ok next step is what to write in SCI, and here im realy stuck. i need explanation how to calculate it.
the way my teahcer told us was:contract price ( 8125-3500) =4625
Cost to date (9500-2660 X65% =(3515)PRofit 1110
from where this 1110 figure came and why we are X cost to date with 65%?
kindly tell me how to solve this question as i have spend an hour thinking.
thanks,“estimated total cost of contract which is 5,500 and add depreciation amount of 4,000 and we still get 9,000”
May I ask, did you use a calculator or was this addition done in your head?
By multiplying revenue and costs by 65% surely that means we are only looking at 65% of the profit – so why multiply it further by another 65%?
Effectively we are taking 65% of revenue and 65% of costs and therefore taking 65% of profit. Why? Because that’s what the IAS tells us to do!
“Where does the figure 1,110 come from?” Are you kidding me?
Contract price per YOU is 4,625
Cost to date per YOU is. (3,515)And you’re asking me where 1,110 comes from?
hehe thankyou sir i got it. problem was my teacher did the calculations directly so while revising i totally lost track of it.
Well, now there’s a thought! If you’re stuck for an idea of what to buy teacher as a thank you gift, forget that old favourite of an apple – buy teacher a calculator
🙂
Hehe true. This question was done in march and yesterday one problem was my brain was already exhausted by full day study and unfortunately this mocca question ended my good day in disbelief.
But thanks now i got it.That’s good. It’s always a good thing to know when your brain just cannot take any more and that’s the time to stop.
I had one student many years ago when I was teaching English law F4 in Latvia and she stood up at 16.00 and as she walked past me to go home an hour before the scheduled finish she said “I’m sorry, my head is too full, I cannot take any more”
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