Question
Elliot Ltd signs a contract on 30 June 2020, agreeing to build a building for Erica Ltd at contract price of $280,000. Erica Ltd will
Elliot Ltd signs a contract on 30 June 2020, agreeing to build a building for Erica Ltd at contract price of $280,000. Erica Ltd will have the control of the asset throughout the construction process. Elliot Ltd estimates the construction cost will be as follows:
Year ending | Cost |
30 June 2021 | 50,000 |
30 June 2022 | 80,000 |
30 June 2023 | 20,000 |
Total | 150,000 |
As the end of its reporting period 30 June 2021, Elliot Ltd had incurred labour costs of $20,000 and materials costs of $40,000. All materials and labour costs were used during the year. As at 30 June 2021, Erica had made progress payments to Elliot Ltd of $100,000.
Required
Calculate the revenue to be recognised by Elliot Ltd for the year ended 30 June 2021 and prepare the journal entries related to the revenue.
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