A company has entered a construction contract on 1st January 2019. The contract will take 2 years to complete and the final contract price is OMR 6,000,000. At the end of first year 2019 the company incurred a cost of OMR 2,400,000 and 60% of work has been completed. Certificate for work completed have been issued to the value of OMR 3,600,000. It is estimated that a further cost of OMR1, 600, 000 will be incurred in the year 2020 to complete the contract. You are required to calculate the amount due from customer that will be accounted for the year 2019 a. OMR 3,400,000 b. OMR 3,600,000 c. None of the options d. OMR 3,800,000

A company has entered a construction contract on 1st January 2019. The contract will take 2 years to complete and the final contract price is OMR 6,000,000. At the end of first year 2019 the company incurred a cost of OMR 2,400,000 and 60% of work has been completed. Certificate for work completed have been issued to the value of OMR 3,600,000. It is estimated that a further cost of OMR1, 600, 000 will be incurred in the year 2020 to complete the contract. You are required to calculate the amount due from customer that will be accounted for the year 2019 a. OMR 3,400,000 b. OMR 3,600,000 c. None of the options d. OMR 3,800,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 9MC

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A company has entered a construction contract on 1st January 2018. The contract will take 2 years to complete, and the final contract price is OMR 6,000,000. At the end of first year 2018 the company incurred a cost of OMR 2,400,000 and 70% of work has been completed. Certificate for work completed have been issued to the value of RO 4,200,000. It is estimated that a further cost of OMR 1,600,000 will be incurred in the year 2019 to complete the contract. You are required to calculate the profit that will be accounted for the year 2018. O a. OMR 200,000. O b. OMR 2,000,000. OC. OMR 2,400,00. O d. OMR 1,800,000.
Suppose that a contract is started on January 1, 2018, with an estimated completion date of December 31, 2019. The final contract price is P1,500,000. In the first year covering January 1 to December 31, 2018: Cost incurred amounted to P600,000. Half the work on the contract was completed. Certificates of work completed have been issued to the value of P750,000. It is estimated with reasonable certainty that further costs to completion in 2019 will be P600,000. Requirements: 1. The contract is certified at what percentage of completion? 2. At Dec 31, 2018, the entity will recognize how much profit? 3. At Dec 31, 2018, the entity will recognize how much contract asset?
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Big Construction Company signs a contract on 1 July 2019, agreeing to build a warehouse for Buyer Corporation Ltd at a fixed contract price of $10 million. Buyer Ltd will be in control of the asset throughout the construction process. Big Construction Company estimates that construction costs will be as follows: 2019 2.5 million 2020 $4 million 2021 $1.5 million The contract provides that Buyer Corporation Ltd will make payments on 31 December each year as follows: 2019 $2 million 2020 $5 million 2021 $3 million The contract is completed and accepted on 31 December 2021. Assume that actual costs and cash collections coincide with expectations and that cost (an input measure) is used as the basis for assessing progress on the construction contract. Big Construction Company has a financial year ending 31 December. Required: a) Using the above data, compute the gross profit to be recognised for each of the three years, assuming that the outcome of the contract can be reliably estimated.…
Big Construction Company signs a contract on 1 July 2019, agreeing to build a warehouse for Buyer Corporation Ltd at a fixed contract price of $10 million. Buyer Ltd will be in control of the asset throughout the construction process. Big Construction Company estimates that construction costs will be as follows:2019 2.5 million 2020 $4 million 2021 $1.5 millionThe contract provides that Buyer Corporation Ltd will make payments on 31 December each year as follows:2019 $2 million 2020 $5 million 2021 $3 millionThe contract is completed and accepted on 31 December 2021. Assume that actual costs and cash collections coincide with expectations and that cost (an input measure) is used as the basis for assessing progress on the construction contract. Big Construction Company has a financial year ending 31 December.Required: b) Prepare the journal entries for 2019, 2020 and 2021 financial year to recognise revenue on the assumption that the measure of progress on the contract can be reliably…
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