UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ACCOUNTANCY AND MANAGEMENT

ACADEMIC YEAR 2019/2020
MAY 2019 TRIMESTER
BACHELOR OF ACCOUNTING (HONS)
TUTORIAL 3 QUESTIONS
MFRS 15
REVENUE FROM CONTRACTS WITH CUSTOMERS
_____________________________________________________________________

Lazar and Huang

1 Contract 12456 commenced during year x12 and has a fixed contract price of RM
900,000. The cost incurred during the year x12 for materials, wages and sub-
contractors charges totaled RM 420,000. Plant costing RM 78,000 was purchased
during the year x12 specifically for the contract.
At the end of x12:
(a) The plant was valued at RM62,000
(b) Unused materials on site were valued at RM80,000
(c) It is estimated that further costs totaling RM 290,000 would be incurred in order
to complete the contract. The figure includes the appropriate costs of plant and
sub-contractors in the future.
(d) The progress billing was RM 388,800.

Required:
(a) Prepare extracts of the Statement of comprehensive income and Statement of
financial position for x12. The entity recognizes revenue based on cost to date bears
to total cost.
2 Robotics Construction entered into a contract to bore a tunnel. The agreed contract
price was RM3 mil. The following table shows the position of the contract at the end
of year x1, x2 and x3 (amount in thousands Ringgit):
Year x1 x2 x3
Variation to the contract price (increase) 400
Costs incurred to date 945 1,800 3,100
Estimated costs yet to be incurred 2,155 1,200 -
Progress billings to date 800 1,900 3,000

The company recognizes profit based on cost incurred to total estimated cost.

Required:
Prepare extracts of the Statement of comprehensive income and Statement of financial
position for x1 to x3.

3 Richard Enterprise specializes in the construction of houses. One of its contracts was
to build a luxury condo for Lux Homes. The agreed price was RM850 mil and
construction was scheduled to begin on 1 April x3 and to be completed on 30 Sept x5.
The details of the contract to 31 Dec x3 and x4 are as follows (amount in RM
millions):
x3 x4
Contract price 850 850
Variation (increase) 40
Costs:
Fees – architects and engineers 10
Materials delivered to site 91
Direct labour costs 90
Overhead (2/3 of direct labour cost, 60
excluding depreciation)
Estimated cost to complete (excludes 471
depreciation)

2
 Material on site at year end for future work 10
Cost to date (excluding depreciation) 459
Cost to complete (excluding depreciation) 271
Progress billing to date 250 600

A plant costing RM32 million was acquired for use in this project. At the end of the
contract, it was estimated that the plant will have a residual value of RM2 million.
Depreciation is charged on a time basis. Richard Enterprise accrues profit on the
contract using the percentage of completion method measured by the cost to date to
total estimated cost. (note: depreciation per year = 12 mil p.a.)

Required:
Prepare extracts of the Statement of comprehensive income and Statement of
financial position for x3 and x4.

CASE STUDY 10.5 (Lam& Lau (2012), ch. 10

3
A contractor has reached the end of its first year of operations. All its contract costs
incurred have been paid for in cash, and all its progress billings and advances have been
received in cash. Contract costs incurred for contracts B, C and E include the cost of
materials that have been purchased for the contract but which have not been used in
contract performance to date. For contracts B, C and E, the customers have made
advances to the contractor for work not yet performed.

The status of its five contracts in progress at the end of Year 1 is as follows:

Required:
Determine the amounts to be disclosed in the financial statements in accordance with
MFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS.