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Revenue Recognition Numericals

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Ayush Jaiswal
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65 views1 page

Revenue Recognition Numericals

Uploaded by

Ayush Jaiswal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Revenue Recognition

Numericals
Question 1
A construction contractor has a fixed price contract for `9,000 million to build a bridge.
The contractor’s initial estimate of contract costs is `8,000 million. It will take three
years to build the bridge. By the end of year one, the contractor’s estimate of contract
costs has increased to ` 8,050 million.
The contractor determines the stage of completion of the contract by calculating the
proportion that contract costs incurred for work performed up to the reporting date
bear to the latest estimated total contract costs. A summary of the financial data during
the construction period is as follows:
Year 1 Year 2 Year 3
I) Amount of revenue agreed in contract 9,000 9,000 9,000
II) Contract costs incurred up to the reporting 2,093 5,957 8,050
date
III) Contract costs to complete 5,957 2,093 ——
IV) Total estimated contract costs (II+III) 8,050 8,050 8,050
V) Estimated profit (I–IV) 950 950 950
VI) Stage of completion (II/IV) 26% 74% 100%

Show the amount of revenue, expenses and profit recognised in the statement of profit
and loss in the three years.
Question 2
Strong Plastics Limited usually provides a credit period of 90 days to its customers.
During the year 2017–18, the total sales of the company amounted to `325 million. Out
of this, amounts aggregating to `220 million were collected from the customers. Based
upon the past experience, the company estimates that about 5% of the amount
outstanding will not be recovered and may have to be written off How will this
information appear in the profit and loss statement for the year ending on 31st March
2018 and the balance sheet as on that date?
Question 3
Fair White Limited is a FMCG company largely catering to domestic markets. During the
year 2016–17, it received its maiden export order for $ 2 million for supply of fairness
cream to USA. The order was duly executed on 1st November 2016. The supplier was
allowed a credit period of 90 days for making payment. The rate of exchange on 1st
November 2016 was `65, whereas by the payments was received on 30th January 2017
at `65.30. How will the above transaction appear in the statement of profit and loss for
the year 2016–17?

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