WorksheetsIFRS - Are we good to go - W8 - Real Estate & Construction
Total questions: 10
Worksheet time: 24mins
A Company entered into a contract in respect of which performance obligations are satisfied over time on 1 January 2014. The contract is expected to last 24 months. The price which has been agreed for the contract is $5 million. At 30 September 2014 the costs incurred on the contract were $1.6 million and the estimated remaining costs to complete were $2.4 million. On 20 September 2014 A Company received a payment from the customer of $1.8 million which was equal to the total of the amounts invoiced. A Company calculates the stage of completion of its performance obligations on contracts on the basis of amounts invoiced to the contract price.
What amount would be reported in A Company's statement of profit and loss for the year ended 30 September 2014 arising from the above contract?
Nil
360,000
1,000,000
1,800,000
Which, if any, of the following statements is correct?
Statement 1: If a contract with a customer provides a warranty, then the warranty always represents a separate performance obligation and part of the transaction price must be allocated to it.
Statement 2: If the agreed date of payment by a customer is later than the date on which goods or services are transferred to that customer, part of the consideration should always be treated as finance income (not revenue)
Statement 2 only is correct
Both statements are correct
Neither statement is correct
Statement 1 only is correct
Which one of these would also be an acceptable method of measuring the performance obligations completed?
Work invoiced to date as a % of total contract price
Cash received to date as a % of total contract price
Costs incurred as a % of total expected costs
Time spent as a % of total expected contract time
The following details apply to a contract where performance obligations are satisfied over time at 31 December 20X5.
Total contract revenue: 120,000
Costs to date: 48,000
Estimated costs to completion: 48,000
Amounts invoiced: 50,400
The contract is agreed to be 45% complete at 31 December 20X5.
What amount should appear in the statement of financial as at 31 December 20X5 as a contract asset?
8,400
48,000
6,000
50,400
Which, if any, of the following statements is correct?
Statement 1 - Borrowing costs can be capitalised on real-estate contracts with customers if the construction entity requires significant financing
Statement 2 - Real estate contracts with customers must always result in revenue being recognised over time, rather than at a point in time
Statement 2 only is correct
Both statements are correct
Neither statement is correct
Statement 1 only is correct
Which, if any, of the following statements is correct?
Statement 1 - The definition of a construction contract is no longer a reason to use percentage of completion accounting
Statement 2 - Assess whether all of three criteria (1) Customer consumes benefits as entity performs (2) Customers control asset as it's created (3) Asset has no alternative use and right to payment exists are meet to use percentage of completion accounting
Statement 2 only is correct
Both statements are correct
Neither statement is correct
Statement 1 only is correct
In general, contract costs incurred in relation to a contract with a customer must be
Recognised as an expense when incurred
Recognised as an asset if they relate to a performance obligation which has not yet been satisfied
Recognised as an asset if they relate to a performance obligation which has been satisfied
Recognised as an asset if they are not expected to be recovered
BuildIt Ltd is a property developer who sold a parcel of land to a customer for $250,000. While the ownership transfers immediately to the customer once the contract is signed, the $250,000 payment is only required at the end of three years. The effective interest rate applicable to this contract is 8%.
In terms of IFRS 15, what are the journal entries relating to the transaction at time of sold parcel of land?
DR Accounts receivable $250,000 | CR Sales $250,000
DR Accounts receivable $250,000 | CR Sales $190,000 | CR Interest Receivable $60,000
DR Accounts receivables $198,450 | CR Sales $198,450
DR Accounts receivables $250,000 | CR Sales $198,450 | CR Interest Income $51,550
A performance obligation is satisfied over time if:
The entity's performance creates an asset which has an alternative use to the entity
The customer does not receive or consume the benefits provided by the entity's performance until the obligation is completely satisfied
The entity does not have an enforceable right to payment for the performance that has been completed to date
The entity's performance creates an asset that the customer controls as it is created
Statement I: An entity shall recognize as an asset the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs
Statement II: The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred
if the contract had not been obtained.
Determine Statement I and Statement II are true or false?
True, True
True, False
False, True
False, False
