MOBY
During the year, Moby entered into a contract to construct an asset for a customer.
The performance obligation is satisfied over time. The balance in the trial balance
represents:
Cost incurred to date $8 million
Value of contract billed (work certified) and cash received $7 million
The contract commenced on 1 October 20X2 and is for a fixed price of $25 million. The costs to complete the contract at 30 September 20X3 are estimated at $12 million.
Moby’s policy is to measure progress based on the work certified as a percentage of
the contract price
SOLUTION
Step 2 – Progress
Percentage of completion is 40% (10,000/25,000)
Good day,Please i don't understand how 10,000 was gotten inorder to calculate the percentage of completion.I'll appreciate if you can explain
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REVENUE
3y ago#1Hi,
Sorry, not too sure on this one. Is the answer right? I'd be looking at the work certified to date of 7 million and dividing it by the total contract value of 25 million, especially given that it specifically states how they are to calculate the percentage complete.
We can get to the 10 million by taking the 25 million and subtracting the 8 million costs to date and the 7 million of work certified, but I've not seen that used previously. Is there anything in the study text to suggest this as a valid method of working out the percentage complete?
Thanks
I also made use of 7mill/25million when i was doing it on my own. I haven't seen this method of calculating the percentage completed in the study text. Usually the work certified is outrightly given
3y ago#3So, I'd assume that it is an error unless somebody can point us in the right direction.
Thanks
Thank you
hello,
As the contract asset workings has been updated, may i know how to calculate the contract asset using the formula Revenue to date - invoice billed to date?
Thanks
3y ago#6Hi,
You take the revenue to date figure from your calculations in the SPL. The billings to date would have to be given in the question.
Thanks
Sir I do understand how we get the 10 mil however why not use the work certified as given that is 7 mil in the question? it is mentioned in the question to use the work certified to measure progress
Can you please clarify if there is any specific reason it is done so in the Question Moby
2y ago#8I'd always use the work certified unless told otherwise. We're still unsure of why they haven't used it in the question.
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