Transaction price for the construction of the ship Costs incurred to date for work performed in...

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Transaction price for the construction of the ship Costs incurred to date for work performed in 2021 for materials to be used in later years Other costs expected in later years Amounts invoiced to VAL plc in 2021 Amounts received from VAL plc in 2021 (in million) 95 43.7 6.8 27.3 30 12.5 For the construction of the ship, BAR plc recognises revenue over time and measures progress using an input method based on the costs incurred to date relative to total expected costs. REQUIRED: i) BAR plc classifies the construction of the ship and the provision of the maintenance service as two separate performance obligations. Explain why this classification appears correct. ii) Show how the construction of the ship should be treated in BAR plc's financial statements for fiscal year 2021. Calculate the relevant amounts, prepare the jour- nal entries and explain your steps. iii) Assume that, in fiscal year 2022, BAR plc increases its estimate of total expected costs for the construction of the ship by an amount of 20 million. Calculate the resulting loss from the construction of the ship and specify in which fiscal year BAR plc has to recognise this loss in its financial statements. iv) Calculate the revenue attributable to the provision of the annual maintenance ser- vice and explain how BAR plc should recognise this revenue. You can, but do not have to, prepare journal entries. Transaction price for the construction of the ship Costs incurred to date for work performed in 2021 for materials to be used in later years Other costs expected in later years Amounts invoiced to VAL plc in 2021 Amounts received from VAL plc in 2021 (in million) 95 43.7 6.8 27.3 30 12.5 For the construction of the ship, BAR plc recognises revenue over time and measures progress using an input method based on the costs incurred to date relative to total expected costs. REQUIRED: i) BAR plc classifies the construction of the ship and the provision of the maintenance service as two separate performance obligations. Explain why this classification appears correct. ii) Show how the construction of the ship should be treated in BAR plc's financial statements for fiscal year 2021. Calculate the relevant amounts, prepare the jour- nal entries and explain your steps. iii) Assume that, in fiscal year 2022, BAR plc increases its estimate of total expected costs for the construction of the ship by an amount of 20 million. Calculate the resulting loss from the construction of the ship and specify in which fiscal year BAR plc has to recognise this loss in its financial statements. iv) Calculate the revenue attributable to the provision of the annual maintenance ser- vice and explain how BAR plc should recognise this revenue. You can, but do not have to, prepare journal entries.

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