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I can´t get any of those answers, here is what I got for both years
Revenue 1,680 1,470
Costs 1,440 1,730
Profit/loss 240 (260)Where have I gone wrong?
Hi
I’m glad you asked this because it has brought to my attention the error that I have made with the dates in the question!
The question should have read “31 October, 2014” and not “31 October, 2013”
However, IF the question had been correct and the figure we were looking for was cost recognition for 2013, the answer would have been $1,440,000 ((ie 40% of ($1,600,000 + $2,000,000))
Now, for the year to 31 October, 2014, we must recognise that a loss is forecast and we should take FULL recognition of that forecast loss.
If you had calculated working W1 in the way that I have demonstrated in recorded lectures, the (cumulative) figure for revenue would have been 75% of $4,200,000 ie $3,150,000
However, because the loss is forecast, the overall loss should be put in as the second figure. That loss amount, in full, is $260,000
That means that the cumulative costs to be recognised must be $3,410,000
But we have already recognised $1,440,000 in 2013 so the figure for recognition in 2014 must be $3,410,000 – $1,440,000 ie $1,970,000
Better?
Much better. My mistake was putting the loss on the period column instead of the cumulative.
Thank you
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