ZEN Ltd signs a contract on 30 June 2019, agreeing to build a bridge for XYN at a contract price of $20 million. XYN will be in control of the asset throughout the construction process. ZEN estimates that construction costs will be as follows: Year Ending 30th June 2020 30th June 2021 Cost $ 5,000,000 $ 8,000,000 $ 3,000,000 $16,000,000 30th June 2022 Total The contract provides that XYN will make payments on 30 June of each year as follows: $ 4,000,000 S 10,000,000 $ 6,000,000 $20,000,000 2020 2021 2022 Total The contract is completed as expected on 30 June 2022. Assume that actual costs and cash collections with expectations and that cost (an input measure) is used as the basis for assessing progress on the car contract. Required: (a) Calculate the income and gross profit recognised each year 2020, 2021, 2022. (b) Prepare the journal entries for the year ended 30th June 2020.
ZEN Ltd signs a contract on 30 June 2019, agreeing to build a bridge for XYN at a contract price of $20 million. XYN will be in control of the asset throughout the construction process. ZEN estimates that construction costs will be as follows: Year Ending 30th June 2020 30th June 2021 Cost $ 5,000,000 $ 8,000,000 $ 3,000,000 $16,000,000 30th June 2022 Total The contract provides that XYN will make payments on 30 June of each year as follows: $ 4,000,000 S 10,000,000 $ 6,000,000 $20,000,000 2020 2021 2022 Total The contract is completed as expected on 30 June 2022. Assume that actual costs and cash collections with expectations and that cost (an input measure) is used as the basis for assessing progress on the car contract. Required: (a) Calculate the income and gross profit recognised each year 2020, 2021, 2022. (b) Prepare the journal entries for the year ended 30th June 2020.
Chapter3: Income Sources
Section: Chapter Questions
Problem 88P
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Transcribed Image Text:ZEN Ltd signs a contract on 30 June 2019, agreeing to build a bridge for XYN at a contract
price of $20 million. XYN will be in control of the asset throughout the construction process.
ZEN estimates that construction costs will be as follows:
Year Ending
30th June 2020
Cost
$ 5,000,000
$ 8,000,000
$ 3,000,000
$16,000,000
30th June 2021
30th June 2022
Total
The contract provides that XYN will make payments on 30 June of each year as follows:
$ 4,000,000
$ 10,000,000
$ 6,000,000
$20,000,000
2020
2021
2022
Total
The contract is completed as expected on 30 June 2022. Assume that actual costs and cash
collections with expectations and that cost (an input measure) is used as the basis for assessing
progress on the car contract.
Required:
(a) Calculate the income and gross profit recognised each year 2020, 2021, 2022.
(b) Prepare the journal entries for the year ended 30th June 2020.
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