Problem 9 On January 1, 2017, Build Company entered into a construction contract with to build oil refinery. The has the following the owner's an Owner an contract oil refinery is highly customized to specifications and changes to these specifications by the owner are expected characteristics; the over the contract term. The oil refinery does not have an alternative use to the contractor. Non-refundable, interim progress payments are required as a mechanism to finance the contract. The owner can cancel the contract at any time (with a termination penalty); any work in process is the property of the As a result, another entity would not need to re-perform the tasks Physical possession and title owner. not pass performed completion of the contract. a single performance obligation to build the refinery. evidences suggests that the contractor’s performance creates an assets that the customer controls and control is being transferred over time. concludes that input method (cost to cost method) instead of output method is a more reasonable method for measuring the progress toward satisfying its performance obligation. to date. do until The contractor determines that the contract has The majority of Build 1911 The contract duration is 3 years with total estimated contract revenue of P300M. The total estimated contract cost as of December 31, 2017 is P200M. cost incurred during year 2017 as 120M including P20M related to contractor-caused inefficiencies which do not represent/depict the transfer As of December 31, 2018, the total The of goods or services to the customer. estimated contract cost becomes 250M due to increase in cost of raw materials. The cost incurred during 2018 is P105M including P5M related to contractor-caused inefficiencies which do not represent/depict the transfer of goods or services to the customer.
Problem 9 On January 1, 2017, Build Company entered into a construction contract with to build oil refinery. The has the following the owner's an Owner an contract oil refinery is highly customized to specifications and changes to these specifications by the owner are expected characteristics; the over the contract term. The oil refinery does not have an alternative use to the contractor. Non-refundable, interim progress payments are required as a mechanism to finance the contract. The owner can cancel the contract at any time (with a termination penalty); any work in process is the property of the As a result, another entity would not need to re-perform the tasks Physical possession and title owner. not pass performed completion of the contract. a single performance obligation to build the refinery. evidences suggests that the contractor’s performance creates an assets that the customer controls and control is being transferred over time. concludes that input method (cost to cost method) instead of output method is a more reasonable method for measuring the progress toward satisfying its performance obligation. to date. do until The contractor determines that the contract has The majority of Build 1911 The contract duration is 3 years with total estimated contract revenue of P300M. The total estimated contract cost as of December 31, 2017 is P200M. cost incurred during year 2017 as 120M including P20M related to contractor-caused inefficiencies which do not represent/depict the transfer As of December 31, 2018, the total The of goods or services to the customer. estimated contract cost becomes 250M due to increase in cost of raw materials. The cost incurred during 2018 is P105M including P5M related to contractor-caused inefficiencies which do not represent/depict the transfer of goods or services to the customer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Under IFRS 15, what is the net income/(loss) to be reported by the company
for the year ended December 31, 2018?
Transcribed Image Text:Problem 9
On January 1, 2017, Build Company entered into a construction contract with
refinery.
an
to
build
oil
The
contract
has
the
following
owner
an
characteristics;
the
oil refinery is highly customized
the
owner's
to
specifications and changes to these specifications by the owner are expected
The oil refinery does not have an alternative use to
Non-refundable, interim progress payments are required as a
The owner can cancel the contract at any
time (with a termination penalty); any work in process is the property of the
As a result, another entity would not need to re-perform the tasks
over the contract term.
the contractor.
mechanism to finance the contract.
owner.
Physical possession and
performed
completion of the contract.
a single performance obligation to build the refinery.
evidences suggests that
to
date.
title
do
not
pass
until
The contractor determines that the contract has
The majority of
the contractor's performance creates an assets that
Build
the customer
controls
and control is being transferred over time.
concludes that input method (cost to cost method) instead of output method is
more reasonable method for measuring the progress
toward satisfying its
a
911
performance obligation.
The
contract duration is 3 years with total estimated contract
of
revenue
P300M.
The total estimated contract cost as of December 31, 2017 is P200M.
cost incurred during year
The
2017
as
120M including P20M
related
to
contractor-caused inefficiencies which do not represent/depict the transfer
of goods or services to the customer.
As of December 31, 2018, the total
estimated
contract
cost
becomes
250M
due
to
increase
in
cost
of
raw
materials.
The cost incurred during 2018 is P105M including P5M related to
contractor-caused inefficiencies which do not represent/depict the transfer
of goods or services to the customer.
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