3.1 Pocket Projects Ltd is a company specialising in the construction of schools for the Eastern Cape government. They were awarded a contract to construct a two‐storey building in Butterworth. A contract price of R12 800 000 was agreed upon and work commenced on 2 March 2021. It was expected that the building would be completed in two and a half years and that total costs would amount to R9 600 000. At year‐end 30 November 2021 actual costs incurred totalled R3 000 000, remaining costs were estimated at R6 600 000 and Pocket Projects Ltd had received billings to date of R4 480 000. The performance obligation will be satisfied over time and as such, Pocket Projects Ltd recognises revenue using the percentage of completion method based on time elapsed since the start of the project to the total expected time. Required: Establish what the value for contracts with customers will be that Pocket Projects Ltd should present in their statement of financial position on 30 November 2021. Indicate clearly whether this will be a contract asset or a contract liability.
3.1 Pocket Projects Ltd is a company specialising in the construction of schools for the Eastern Cape government. They were awarded a contract to construct a two‐storey building in Butterworth. A contract price of R12 800 000 was agreed upon and work commenced on 2 March 2021. It was expected that the building would be completed in two and a half years and that total costs would amount to R9 600 000.
At year‐end 30 November 2021 actual costs incurred totalled R3 000 000, remaining costs were estimated at R6 600 000 and Pocket Projects Ltd had received billings to date of R4 480 000. The performance obligation will be satisfied over time and as such, Pocket Projects Ltd recognises revenue using the percentage of completion method based on time elapsed since the start of the project to the total expected time.
Required:
Establish what the value for contracts with customers will be that Pocket Projects Ltd should present in their
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