Revenue from contract

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February 18, 2024 at 9:20 am #700586
ashiswar1003
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Henley Co entered into a $10 million contract to build an asset for a customer on 1 April 20X4. The contract is expected to take 2 years and a surveyor has assessed the value of work done as $4 million. The contract will cost $8 million and Henley Co has spent $4 million to date. Henley Co measures progress towards completion using an output method, comparing the work certified to date to the total contract price.

What profit should Henley Co recognise for the year ending 31 December 20X4?
$_________’000

My confusion
Hlo sir/madam… I have confusion when calculation cost of sales in the sopl . Here the cost to date is given 4m but in answer when calculating cost of sales it is calculated by 8*40% = 3.2
Why this happen sir
February 26, 2024 at 9:22 pm #701229
P2-D2
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The 40% is the percentage complete, being the value of the work done of $4m divided by the total contract price of $10m (4/10 x 100%). To calculate the costs to be included in the SPL then we apply the percentage complete to the total costs to date of $8m.

Thanks
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