In November 20X2, an entity contracts with a customer to refurbish a 3-storey building and install new elevators for a total consideration of ₱5,000,000. The promised refurbishment service, including the installation of elevators, is a single performance obligation satisfied over time. Total expected costs are ₱4,000,000, including ₱1,500,000 for the elevators. The entity determines that it acts as a principal because it obtains control of the elevators before they are transferred to the customer. A summary of the transaction price and expected costs is as follows: Transaction price ₱5,000,000 Expected costs: Elevators ₱1,500,000 Other costs 2,500,000 Total expected costs ₱4,000,000 The entity uses an input method based on costs incurred to measure its progress towards complete satisfaction of the performance obligation. The customer obtains control of the elevators when they are delivered to the site in December 20X2, although the elevators will not be installed until June 20X3. The costs to procure the elevators are significant relative to the total expected costs to completely satisfy the performance obligation. The entity is not involved in designing or manufacturing the elevators. As of December 31, 20X2, the entity has incurred total costs of ₱500,000, excluding the cost of the elevators. How much revenue is recognized in 20X2? 1,000,000 c. 2,500,000 2,200,000 d. 0 How much profit is recognized from the contract in 20X2? 265,000 c. 200,000 220,000 d. 0
In November 20X2, an entity contracts with a customer to refurbish a 3-storey building and install new elevators for a total consideration of ₱5,000,000. The promised refurbishment service, including the installation of elevators, is a single performance obligation satisfied over time. Total expected costs are ₱4,000,000, including ₱1,500,000 for the elevators. The entity determines that it acts as a principal because it obtains control of the elevators before they are transferred to the customer. A summary of the transaction price and expected costs is as follows:
Transaction price ₱5,000,000
Expected costs:
Elevators ₱1,500,000
Other costs 2,500,000
Total expected costs ₱4,000,000
The entity uses an input method based on costs incurred to measure its progress towards complete satisfaction of the performance obligation. The customer obtains control of the elevators when they are delivered to the site in December 20X2, although the elevators will not be installed until June 20X3. The costs to procure the elevators are significant relative to the total expected costs to completely satisfy the performance obligation. The entity is not involved in designing or manufacturing the elevators. As of December 31, 20X2, the entity has incurred total costs of ₱500,000, excluding the cost of the elevators.
- How much revenue is recognized in 20X2?
- 1,000,000 c. 2,500,000
- 2,200,000 d. 0
- How much profit is recognized from the contract in 20X2?
- 265,000 c. 200,000
- 220,000 d. 0
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