Question
Please show calculations on everything, its for my homework A company entered into a contract on 01.01.x1 for the construction of a smaller building, where
Please show calculations on everything, its for my homework
A company entered into a contract on 01.01.x1 for the construction of a smaller building, where delivery was agreed to 31.12.x3. According to the contract, the sale price to be paid upon delivery was NOK 9,000,000. At the time, the company estimated that the total cost of the project would amount to NOK 8,000,000. The tax rate for the entire period is 20%.
During 20x1, NOK 2,000,000 was incurred and the company estimated at the same time that the remaining would be NOK 6,000,000.
What is to be recognized in the income statement as income related to the contract in 20x1 now that the company assesses the contract after current settlement with profit and uses accrued cost in relation to the expected total cost as an estimate of the degree of completion?
As of 31.12.x1, the asset "Project under execution" is valued at tax value NOK 2,000,000.
What is capitalized as deferred tax liability as of 31.12.x1 related to the performance of the contract?
During 20x2, an additional NOK 5,000,000 will be incurred and as of 31.12.x2, the company estimates that it will incur an additional 3,000,000.
What is to be recognized in the income statement as income related to the contract in 20x2 now that the company assesses the contract after current settlement with profit and uses accrued cost in relation to the expected total cost as an estimate of the degree of completion?
What is the provision for expected loss on the contract in 20x2?
What is the book value of the associated receivable on 31.12.x2?
In 20x3, the building is completed and handed over to the buyer. NOK 2,500,000 was incurred in costs for the project in 20x3.
How does the contract affect the operating profit of the company in 20x3 (show with amount in NOK)?
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