!~~~~~
Revenue recognition over time Tall Constructions Ltd had a large three-year project with a fixed price contract for a total revenue of $5 500 000 and estimated total costs of $4 500 000. The project was 30 per cent complete at the end of the first year, 65 per cent complete at the end of the second year, and 100 per cent complete at the end of the third year.
Revenues and costs were as estimated. Tall Constructions Ltd uses cost (an input measure) in order to determine the progress towards completing their performance obligation under the contract. The asset being constructed is under the control of the customer throughout the project period.
1 What profit was earned during the first year if cost (an input measure) was used as the method for revenue to be recognised over time?
2 What profit was earned during the second year if cost (an input measure) was used as the method for revenue to be recognised over time?