CA Inter P1 · Chapter 6 · Question 1 of 8
Case: Tungabhadra Builders Ltd has a fixed price contract for ₹1,20,00,000. Costs incurred to date are ₹42,00,000 and estimated costs to complete are ₹63,00,000. Stage of completion is measured by the proportion of costs incurred. The profit to be recognised to date under AS 7 is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) ₹6,00,000
Explanation
Total estimated cost = 42,00,000 + 63,00,000 = 1,05,00,000; stage of completion = 42,00,000/1,05,00,000 = 40%. Contract revenue recognised = 1,20,00,000 x 40% = 48,00,000. Profit = 48,00,000 - 42,00,000 = ₹6,00,000, which also equals total expected profit 15,00,000 x 40%.
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