On 1 January 2020, Margenta Bhd entered into a contract to build a two-storey bungalow for...

 

  

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On 1 January 2020, Margenta Bhd entered into a contract to build a two-storey bungalow for Dato' Tan, a well-established businessman, for a contract sum of RM3 million within 24 months from the agreement date. The bungalow is a birthday gift to Dato' Tan's wife, Datin Ling. Margenta Bhd cannot transfer the bungalow to another client and Dato' Tan, on the other hand, cannot terminate the contract. Upon default by Dato' Tan before completion of the bungalow, Margenta Bhd is entitled to all contractual prices if it decides to complete the contract. The schedule of progress payment and cost estimation are as follows: Stage Signing of contract Land works and piling Flooring, walls and roofing Wiring, plumbing and door frame Road and drainage Upon production of Certificate of Compliance and Completion Vacant possession Total Percentage (%) Amount due (RM) 10 õ õ õ õ õ õ 20 20 10 10 20 10 100 300,000 600,000 600,000 300,000 300,000 600,000 300,000 3,000,000 Cost (RM) 495,000 495,000 247,500 253,125 506,250 253,125 2,250,000 Based on experience, Margenta Bhd estimates that stages up to wiring, plumbing and door frame can be completed in the first year. Revenue is calculated based on cost incurred. Required: Based on MFRS 15, Revenue from Contract with Customers. i. Explain whether the revenue is earned at a point in time or over a period of time. ii. Explain what needs to be changed to reverse your answer in part (i) above. iii. Provide one alternative to calculate revenue apart from cost incurred. iv. If legal and other fees totaling RM30,000 are absorbed by Margenta Bhd, explain whether the revenue recognised will change. On 1 January 2020, Margenta Bhd entered into a contract to build a two-storey bungalow for Dato' Tan, a well-established businessman, for a contract sum of RM3 million within 24 months from the agreement date. The bungalow is a birthday gift to Dato' Tan's wife, Datin Ling. Margenta Bhd cannot transfer the bungalow to another client and Dato' Tan, on the other hand, cannot terminate the contract. Upon default by Dato' Tan before completion of the bungalow, Margenta Bhd is entitled to all contractual prices if it decides to complete the contract. The schedule of progress payment and cost estimation are as follows: Stage Signing of contract Land works and piling Flooring, walls and roofing Wiring, plumbing and door frame Road and drainage Upon production of Certificate of Compliance and Completion Vacant possession Total Percentage (%) Amount due (RM) 10 õ õ õ õ õ õ 20 20 10 10 20 10 100 300,000 600,000 600,000 300,000 300,000 600,000 300,000 3,000,000 Cost (RM) 495,000 495,000 247,500 253,125 506,250 253,125 2,250,000 Based on experience, Margenta Bhd estimates that stages up to wiring, plumbing and door frame can be completed in the first year. Revenue is calculated based on cost incurred. Required: Based on MFRS 15, Revenue from Contract with Customers. i. Explain whether the revenue is earned at a point in time or over a period of time. ii. Explain what needs to be changed to reverse your answer in part (i) above. iii. Provide one alternative to calculate revenue apart from cost incurred. iv. If legal and other fees totaling RM30,000 are absorbed by Margenta Bhd, explain whether the revenue recognised will change.

Answer rating: 100% (QA)

i It is over a amount of your time as a result of per the agreeme... View the full answer