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In a construction contract that is 80% complete the following information is given as at the end of the first year.
Contract price $2,000,000
Cost incurred to date $ 1,600,000 includes $50,000 period specific
Estimated costs to complete $550,000what figures should be recognized in the statement of profit or loss for revenue recognized and costs recognized?
The answer is $1,600,000 revenue, $1,750,000 costs.
Can someone tell me how the costs where calculated?
A loss on the contract is forecast! Quantify that forecast loss.
What figure should be shown as costs recognized in order to recognize IN FULL the extent of that forecast loss
Ok?
can any 1 explain how revenue and costs are calculated ?i m unable to understand
Hello ,earlier I asked the same question from mister Mike and he was very kind to explain,this is his explanation :
A 2m contract, 50,000 period specific, other costs to date of 1,550,000 and further costs to complete of 550,000. That gives TOTAL costs on the contract of 1,550 + 50 + 550 = 2,150 and the contract I guess was for $2,000,000
Revenue recognised 80% * 2,000,000 = 1,600,000Period specific 50,000
General costs ?Forecast loss $150,000
Therefore costs to be recognised are $1,600,000 + $150,000 = $ 1,750,000
Where losses are forecast, we take account of the entire forecast loss
In addition, when dealing with the period specific costs, we take 100% of those in the year to which they relate
Is that ok now?
Also I can’t to get correct answer for other test question for cost recognise ??
Contract cost 2 000 000 $ .cost incurred to date 1 300 000 $ includes period specific
50 000 $.cost to complete 400 000 $. The correct answer is cost recognised 1040 000 $Anybody can help?
You’ve not given me enough information! For example, what is the value of the contract – is that the $2m? And what percentage completion has been reached?
Revenue recognised 60% x 2,000,000 = 1,200,000
Costs recognised
100% x 50,000. 50,000
60% x (1,250,000 + 400,000). 990,000Ok?
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