Question 1 Contracts and Performance Obligations ABC is a motor vehicle dealer, with several customers

X traded in her existing vehicle for a new car, paying the difference in value in cash.

Y purchased a motorcycle, delivering an identical vehicle in exchange. He also owns a vehicle dealership.

Z paid for a new car and also chose several additional products for which he paid extra. These included tinted windows, a three-year warranty and free servicing valued at $2000. The servicing option can be used for any vehicles over two-year period.

Required

a Explain whether ABC has contracts with X and Y.

b. Identify the performance obligation(s) with respect to Customer Z.

For each performance obligation, explain whether the related revenue should be recognised at a point in time or over time.

Question 4 Construction Contracts A company is constructing a bridge at a fixed price of $15 million over three years. The customer remains in control of the bridge throughout the contract. The expected costs and billings are provided below. Year 1 2 3 Expected Cost 4,000,000 4,500,000 3,500,000 Billings 5,000,000 5,000,000 5,000,000

Required

Assume the percentage of completion CAN be measured reliably.

a. If actual costs coincide with expectations: Calculate the amount of revenue that the company should company recognise in each year