International Financial Reporting by Melville Alan

Author:Melville, Alan [Melville, Alan]
Language: eng
Format: epub
Publisher: Pearson Education Limited
Published: 2017-06-26T04:00:00+00:00

Solution

These figures have been derived as follows:

(i) Each year’s revenue figure is equal to the value of the work completed to date, less the revenue recognised in previous years (if any).

(ii) The cost of the work done in 2018 is (£270,000 – £15,000) = £255,000. Similarly, the cost of the work done to date by the end of 2019 is £535,000. So the cost of the work done during 2019 is £280,000 (£535,000 – £255,000) and the cost of the work done during 2020 is £95,000 (£630,000 – £535,000).

(iii) The contract asset at the end of each year is equal to the difference between contract revenue to date and the amount invoiced to date. Trade receivables are equal to the difference between the amount invoiced to date and the amount received to date.

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