REVENUE FROM CONTRACT WITH CUSTOMERS

This topic has 3 replies, 2 voices, and was last updated 10 months ago by P2-D2.

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August 28, 2021 at 12:46 pm #633261
Anonymous
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Hello!
I am a bit confused regarding the answer of a particular question in the Kaplan rev kit, I would be grateful if someone could help me out with it,thanks in advance!
Question:
Rattan commenced a contract to build an asset for customer in the Yr ended 30 sep x4.
The contract price agreed was 1.5m and the total expected costs 800,000.
Ratten will satisfy performance obligations over time.

The following figures were correctly recorded in profit or loss for the yr ended 30 sep x4:
Revenue 450
Cost of sales (240)
Profit 210

The following figures are relevant in relation to the contract:
x4 x5
Costs incurred 325 570
Work certified 450 1050

Ratten recognises progress on the basis of work certified over contract price.

What should be the cost of sales figure for Ratten in statement of profit or loss for the year end 30th September x5?
A) 320000
B) 250000
C)560000
D) 240000

I’m a bit confused about how to go about with this question, it would be lovely if someone could explain and help me out,thank you so so much!
August 29, 2021 at 11:34 am #633369
P2-D2
Keymaster
- Topics: 4
- Replies: 6115
Hi,

I’d be happy to help but you need to show what you’ve done first before I do so. Remember what you need to do is to calculate the cost of sales figure for the year, so I’d start off by working out the total profit to be recognised on the contract based upon the percentage complete. You cant hen use this to get the total revenue and costs to be recognised to date and then compare this to what has already been recognised in prior years. The difference is what is to be recognised in the current year. See how you get on and let me know so that I can help further.

Thanks
August 30, 2021 at 3:48 pm #633543
Anonymous
- Topics: 5
- Replies: 2
I’m really sorry if I am bothering you!
But I’m not getting any of the answers mentioned in the question,
So I’m really confused as to how to go about with this question and solve it,
It would be really helpful if you could work out this the question and answer it for me? So that can I wrap my head over how to work on this problem and answer it,I hope I’m not asking for too much!
Thank you so much for taking your time to reply
September 1, 2021 at 7:13 pm #633853
P2-D2
Keymaster
- Topics: 4
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If you’ve attempted it then let me see your calculations and we can work out where you are going wrong. You aren’t bothering me at all, I just want you to show me what you’ve done so that we can learn from it.

Thanks
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