HQ Ltd commences construction of an office building on 1 January 2018 for JX Ltd. The construction
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Question:
The following information relates to the project:
2018 ($000) | 2019 ($000) | 2020 ($000) | |
---|---|---|---|
Costs for the year | 8000 | 5000 | 4500 |
Costs incurred to date | 6000 | 11500 | 17500 |
Estimated costs to complete | 11500 | 6000 | 0 |
Progress billings during the year | 8500 | 4500 | 7000 |
Cash collected during the year | 7500 | 6500 | 6000 |
HQ Ltd uses cost (an input measure) as the basis for measuring progress towards satisfaction of the performance obligation. The asset under construction is deemed to be under the control of JX Ltd. Actual costs to complete the project deviate from expectations.
Required:
a) Calculate the income recognized each year using the percentage completion method. (Show all workings)
b) Provide the journal entries for the year 2018, assuming that the stage of completion and the outcome of the construction contract can be reliably estimated.
Related Book For
Financial accounting
ISBN: 978-1118285909
IFRS Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel
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