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1 January 2014 construction contract that will last 24 months. Agreed contract price is £15m. At 30 Sep 2014 costs incurred were £5m and estimated remaining costs to complete were £7m.
20 Sep 2014, received customer payment of £7m – that was exactly the amount that has been invoiced as progress billing. Stage of completion is calculated on the basis of progress billing as a % of contract price.
What amount would be reported in the SFP at 30 Sep 20X4 for the amount due to/from customers?The answer is £800,000 liability and I’m not sure how to arrive at this answer.
Thanks.
Hi,
It could be that there is a mistake in the answer. The figure would be calculated as the costs incurred plus profit to date less amounts billed. The profit to date I think is £1.4m. The total profit is £3m (=15 – 5 – 7) and we take 7 (progress billings)/15 (contract price) of this to give the £1.4m.
The SFP figure is then £5m (costs to date) + £1.4m (profit to date) – £7m (progress billings) = £0.6m liability.
Thanks
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