Revenue from Contracts with Customers Flashcards
This is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design technology and function or their ultimate purpose or use.
Construction Contract
What are the three types of construction contracts?
- Fixed Price Contract
- Cost-plus Contract
- Construction Contract with Variation
What is the cost escalation clause?
An extra provision that the contractor would provide wherein the increase of construction cost will increase the contract price.
How do you calculate for the cost-plus contract?
Construction Cost + Profit
How do you measure the fixed price contract?
Initial Fixed Price + Cost escalation clause
What is the construction contract with variation?
This is a construction contract wherein there are changes na pwedeng gumanap.
This is the total amount of consideration receivable under the construction contract.
Construction Revenue
TRUE OR FALSE:
When there is no contract, there is no revenue.
True
Construction Revenue comprises of what?
- Initial Amount of Revenue
- Variations
Variations: Change orders, penalties, incentives.
What are three most common types of variations?
- Change Orders
- Penalties - from delay
- Incentives - from early completion
These are the expenses that the contractor incurs.
Construction Costs
What do the construction costs comprise of?
- Costs that relate directly to the specific contract
- Costs attributable and allocatable
- Costs chargeable to the customer
What are the exclusions from construction costs?
- General Admin Costs
- RnD Costs
- Depreciation of PPE not used on any contract
- Cost of wasted materials, labor, or other resources
(unless reimbursement is specified in contract)
How do you know if the outcome of the contract can be reasonably estimated?
If the contractor has prior experience on working on similar projects.
How do you know if the outcome of the contract can’t be reasonably estimated?
If the contractor has no prior experience on similar experience.
What method do you use if the construction contract can be reasonably estimated?
Percentage of completion method
What method do you use if the construction contract can’t be reasonably estimated?
Zero Profit Method
What are the two methods of measuring progress under the percentage of completion method?
- Output Method
- Input Method
When it comes to the input method of the percentage of the completion method, how do you solve for the percentage of completion?
Cumulative Costs Incurred to Date
Divide: Est. Total Construction Costs
————————————
Percentage of Completion
Prior period construction costs
Add: Current period construction costs incurred
—————————————–
Cumulative Construction Costs incurred to date
Construction costs incurred to date
Estimated costs to complete
———————————-
Est. total construction costs
What are contract retentions?
These are the cash being withheld by the customer just as an insurance or security purposes para tapusin nung contractor yung project.
How do you solve for Contract Asset (Liability) in LTCC?
CIP
Less: Progress Billings
————————-
Contract Asset (Liability)
Progress Billings are cumulative
How do you solve for CIP?
CIP, beg
Cost incurred
Add: RGP
Less: RGL
—————
CIP, end
