Homework Answers
In the given case,
Contract for building a factory = $15 million
The contractor incurred a cost of $1 million on the construction up to December 31, 2008.
Estimated cost of completion of contract = $15 million
| Particulars | Amount ($) |
| Cost of construction of factory incurred 31.12.2008 | 1 million |
| Add :- estimated future cost | 15 million |
| Total estimated cost of construction | 16 millions |
| Contract price | 15 millions |
Stage of completion
Percentage of completion till date to total estimated cost of construction = (1÷16)×100 = 6.25%
Revenue and profit to be recognised for the year 31st December 2008 = $15 millions × 6.25% = $937500
Loss for the year 31.12.2008 = $1milliion - $937500 = $62500.
From the given contract,
We can recognise the revenue of $937500 and a loss of $62500.
These are all information required to solve the above given question.
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