Answer:
This a loss making contract of $33,000
Explanation:
Under I.A.S 11, The following steps are followed
<em>Step 1 - Determine Expected Outcome of the Contract
</em>
Project Value - 420,000
Cost to date - (278,000)
Cost to complete - (175,000)
Outcome of Contract is Loss of $33,000
<em>Step 2 - Determine the amounts to be recognized in Income Statement for Profit, Revenue and Cost
.</em>
Cost to date - 278,000
Contract Loss (33,000)
Revenue (Balancing Amount = $245,000
<u>Journal Entries</u>
Dr Cost expended to date - 278,000
Cr Revenue to date - 245,000
Cr Loss 33,000
b) Percentage Completion Method
Stage of Completion % = (Costs incurred to Date / Total Contract Costs
)*100
278,000/453,000 = 61.36%
Revenue recognizable = 61.36% * Contract Value = 257,712
Cost to date =................................................................. = 278,000
Loss to Date (balancing figure)................................... = 20,288
<u>Journal Entries</u>
Dr Cost expended to date - 278,000
Cr Revenue to date - 257,712
Cr Loss 20,288
