Reference no: EM133040885
Question 1 - On March 1, 2022, Joshua Corporation enters a contract to build a hotel which is estimated to cost $31,200,000. The company recognizes construction revenue over time. Information on this project for 2022-2024 follow:
|
|
Contract Billings
|
Costs Incurred
|
Estimated Costs to Complete
|
|
2022
|
10,500,000
|
5,460,000
|
20,540,000
|
|
2023
|
12,500,000
|
9,984,000
|
13,156,000
|
|
2024
|
14,440,000
|
15,756,000
|
-
|
The contract contains a penalty clause that penalizes the company a reduction of $70,000 from the contract price for every week of delay. In 2024, the contract was delayed for 8 weeks. How much is the gross profit for 2024?
A. 1,164,000 B. 1,466,400 C. 1,724,000 D. 1,824,000
Question 2 - Rodrigo Corporation is building two construction projects. The following information relate to these projects during the year. Any costs incurred are expected to be recoverable.
|
|
Project 1
|
Project 2
|
|
Contract Price
|
10,500,000
|
7,500,000
|
|
Costs incurred to date
|
6,000,000
|
7,000,000
|
|
Est'd costs to complete
|
3,000,000
|
1,000,000
|
|
Billings during the year
|
7,000,000
|
1,000,000
|
|
Collections during the year
|
6,000,000
|
1,000,000
|
How much gross profit/(loss) should the company report in its income statement for the year?
OVER TIME, POINT IN TIME
A. 562,500, (500,000)
B. 500,000, (500,000)
C. 500,000, 0
D. (500,000), 500,000
Question 3 - On January 1, 2017, Billy Company entered into a construction contract with an owner to build an oil refinery. The contract has the following characteristics; the oil refinery is highly customized to the owner's specifications and changes to these specifications by the owner are expected over the contract term. The oil refinery does not have an alternative use to the contractor. Non-refundable, interim progress payments are required as a mechanism to finance the contract. The owner can cancel the contract at any time (with a termination penalty); any work in process is the property of the owner. As a result, another entity would not need to re-perform the tasks performed to date. Physical possession and title do not pass until completion of the contract. The contractor determines that the contract has a single performance obligation to build the refinery. The majority of evidences suggests that the contractor's performance creates an assets that the customer controls and control is being transferred over time. Build concludes that input method (cost to cost method) instead of output method is a more reasonable method for measuring the progress toward satisfying its performance obligation. The contract duration is 3 years with total estimated contract revenue of $300,000,000. The total estimated contract cost as of December 31, 2017 is $200,000,000. The cost incurred during year 2017 as $120,000,000 including $20,000,000 related to contractor-caused inefficiencies which do not represent/depict the transfer of goods or services to the customer. As of December 31, 2018, the total estimated contract cost becomes $250,000,000 due to increase in cost of raw materials. The cost incurred during 2018 is $105,000,000 including $5,000,000 related to contractor-caused inefficiencies which do not represent/depict the transfer of goods or services to the customer.
Under IFRS 15, how much is the net income/(loss) to be reported by the company for the years ended December 31, 2017 and 2018?