70 Chapter 13 Paper F7 Calculation of Construction Contract Profits September/December 2016 contract revenue comprises: initial amount of revenue agreed in the contract agreed variations in contract work, claims and incentives… … but only to the extent that revenue will probably result, and … these revenues are capable of reliable measurement Tomas has been asked by Iveta to build an apartment block in Kaunas. The project will take 4 years. Iveta has agreed to pay the following: $ 1 million for the apartment block $300,000 extra if the block is at least 60% complete by the end of year 2 a bonus of $100,000 if Iveta is pleased with the finished block At the end of year 1, how much of the total contract revenue should be recognised? At the end of year 2, what options would you have?
70 Chapter 13 Paper F7 Calculation of Construction Contract Profits September/December 2016 contract revenue comprises: initial amount of revenue agreed in the contract agreed variations in contract work, claims and incentives… … but only to the extent that revenue will probably result, and … these revenues are capable of reliable measurement Tomas has been asked by Iveta to build an apartment block in Kaunas. The project will take 4 years. Iveta has agreed to pay the following: $ 1 million for the apartment block $300,000 extra if the block is at least 60% complete by the end of year 2 a bonus of $100,000 if Iveta is pleased with the finished block At the end of year 1, how much of the total contract revenue should be recognised? At the end of year 2, what options would you have?
ACCA_F7_S16_Notes.docx