For latest course notes updates, free audio and video lectures and

For latest course notes updates, free audio and video lectures and Support please visit www.opentuition.com

[20:01:32] --------------------------Paper F7--------------------------

[20:01:37] Salman: Hello

[20:01:41] Salman: Guys

[20:01:45] Salman: there is some problem

[20:01:49] Salman: some F6 students

[20:01:50] sweety2009: ok

[20:01:53] kwmpeter: whts that

[20:01:55] Salman: wants to attend F7

[20:01:58] paula13: and me - doing f7 and f8

[20:01:59] masoodsarwar: sorry people ... i I clicked home room :(

[20:02:01] Salman: and the new time doesnt suit them

[20:02:12] Salman: so we will discuss the new time after the session

[20:02:13] Salman: OK?

[20:02:20] gaboosm: ok

[20:02:22] davisdadon: ok

[20:02:24] misery108: ok

[20:02:26] kwmpeter: ok

[20:02:31] chrismar112003: ok

[20:02:33] Salman: download these

[20:02:35] anastasia270683: fine with me, but is today's session still happening now?

[20:02:49] Salman: yes its happening

[20:02:51] Salman: Anastasia

[20:02:53] Salman has uploaded a file: (Download IAS 2 and 11 Inventory and Construction Contracts.pdf)

[20:02:53] anastasia270683: ok

[20:02:54] Salman: have u come prepared

[20:02:58] Salman: for IAS 2 and 11

[20:02:58] Salman: ?

[20:03:01] Salman: these are the notes

[20:03:03] Salman: download

[20:03:06] Salman: there are questions

[20:03:09] Salman: we will be doing

[20:03:13] Salman: I already sent an email

[20:03:23] Salman: if someone is not receiving the email

[20:03:28] Salman: he or she should tell me right now

[20:04:27] paula13: i have not received an email

[20:04:40] Salman: change your font colour PAULA

This chat was originally held on www.opentuition.com

to participate live in these discussions please log on to http://opentuition.com/chatroom/

1


[20:04:40] paula13: i have subscribed to this group just 2 days ago though ...

[20:04:45] Salman: OK

[20:04:48] Salman: I sent it before that

[20:04:56] Salman: You should have downloaded them from the Forums

[20:05:01] Salman: they were available there

[20:05:22] paula13: ok

[20:05:41] Salman: Should we start now?

[20:05:46] davisdadon: yes

[20:05:47] chrismar112003: yes

[20:05:49] anastasia270683: yes

[20:05:50] gaboosm: fire away

[20:05:50] paula13: yes

[20:06:22] Salman: Session Four IAS 2 and 11 Inventory and Construction Contracts...

[20:06:30] Salman: IAS 2 Inventory

[20:06:37] Salman: What is the objective of IAS 2?

[20:06:58] misery108: Inventory

[20:07:05] davisdadon: The treatment and recognition of inventory on the SOFP

[20:07:11] gaboosm: how to value inventory

[20:07:21] anastasia270683: lower of cost and NRV

[20:07:26] irinuca2001ro: to recognize the cost of invntories

[20:07:40] Salman: Give me one big PROPER COMPLETE answer....

[20:07:43] sichom02: prescribe treatment for inventories and determine cost

[20:07:49] Salman: the one which examiner will give 3 on 3

[20:08:34] sichom02: asset must be recognised and subquently expended

[20:08:54] davisdadon: IAS2 is concerned with the recognition, treatment and valuation of inventory on the Statement

Of Financial Position. It perscribes methods for treatment of inventory that has become obsolete...

[20:08:55] irinuca2001ro: acounting treatmant for inventories at the historical moment

[20:08:58] Salman: the objective of IAS 2 is to presribe the accounting treatment of inventories regarding their recognition, initial valuation and discolsures...

[20:09:04] Salman: COOL!

[20:09:10] Salman: How do we value Inventories?

[20:09:23] priti: lower of cost and NRV

[20:09:24] gaboosm: lower of cost and nrv

[20:09:31] sichom02: the std also provides guidance on cos fomulae to adopt and when to write down asset to NRV

[20:09:31] mohdqaq: FIFO

[20:09:38] misery108: lower of cost and NRV



2


[20:09:39] Salman: {mohdqaq} :O

[20:09:46] mohdqaq: weighted avaerage

[20:09:50] Salman: {mohdqaq} wait a minute brother, we'll come on to that

[20:09:54] Salman: you are wrong for now

[20:09:54] irinuca2001ro: lower cost NRV

[20:10:00] mohdqaq: ok

[20:10:05] Salman: The valuation of Inventory

[20:10:11] Salman: is on Lower of COST or NRV

[20:10:11] sichom02: at lower of cost and nrv

[20:10:15] Salman: whichever is lower


[20:10:20] Salman: we recognise on that

[20:10:24] Salman: What is COST?

[20:10:27] Salman: for Inventories...

[20:10:40] mohdqaq: Puchase Plus Conversion cost

[20:10:40] priti: purchase cost

[20:10:46] gaboosm: it includes all direct costs

[20:10:49] davisdadon: we value inventory at cost. Cost includes the price paid to bring the inventory to its location less any rebates or discounts

[20:10:59] irinuca2001ro: all the cost with aquisition and

[20:11:02] chrismar112003: Cost id Purchase price, cost of conversion, other costs incurred in bring the inventories to present condition

[20:11:13] Salman: means

[20:11:16] Salman: all the costs of

[20:11:20] Salman: purchases

[20:11:24] Salman: cost of conversion

[20:11:26] irinuca2001ro: manufacturer plus transport to the place

[20:11:32] sichom02: cost is purchase costs , costs of conversion and other directly attributable to bringing asset o prest condition

[20:11:41] Salman: and the costs incurred in bringing the inventories to their present location and condition

[20:11:45] Salman: we already know what they are

[20:11:50] Salman: through IAS 16 and 38

[20:11:52] Salman: cool?



[20:12:04] Salman: what is NRV?



3


[20:12:13] gaboosm: net realisable value

[20:12:19] mohdqaq: estimated selling prices less

[20:12:25] misery108: estimated selling price - cost to sell

[20:12:30] gaboosm: selling price less transportation cost

[20:12:33] mohdqaq: estimated cost of complition

[20:12:42] anastasia270683: selling price less cost of completion and selling costs

[20:12:46] davisdadon: NRV is the estimated selling price less the estimated cost to sell

[20:12:54] irinuca2001ro: selling price less cost of completion and selling costs

[20:12:54] mohdqaq: and any other cost nessary to the sale

[20:13:03] chrismar112003: expected to realise from their sales

[20:13:04] davisdadon: or less estimated cost to completion

[20:13:08] sichom02: estimated cost of selling less costs incured

[20:13:11] Salman: hmm

[20:13:13] Salman: yeah

[20:13:16] Salman: u r right

[20:13:20] Salman: by the way

[20:13:27] Salman: what is IAS 2 about? :D

[20:13:36] mohdqaq: Incontories

[20:13:39] chrismar112003: inventories

[20:13:39] priti: inventory

[20:13:41] mohdqaq: inventories

[20:13:47] Salman: Inventory?

[20:13:48] gaboosm: inventory

[20:13:52] sichom02: inventory

[20:13:55] gaboosm: valuation

[20:13:57] Salman: are you sure?

[20:13:58] mohdqaq: held for sale

[20:13:59] irinuca2001ro: cost of inventory

[20:14:01] Salman: its about Inventory?

[20:14:05] Salman: lOL

[20:14:06] Salman: hahhaa

[20:14:07] Salman: OK OK

[20:14:09] Salman: Cool down

[20:14:13] Salman: Mohdqaq

[20:14:16] Salman: you are confused :(

[20:14:19] Salman: it is about inventory



4


[20:14:22] Salman: I JUST WANT TO KNOW

[20:14:26] Salman: What is INVENTORY? :D

[20:14:27] sichom02: funny salman

[20:14:41] Salman: {sichom02} ;)

[20:14:42] mohdqaq: inventories are assest

[20:14:44] gaboosm: stock held by a business

[20:14:46] davisdadon: inventory, stock, goods...

[20:14:46] anastasia270683: goods held for resale?

[20:14:48] sichom02: inventory are stocks held for sale

[20:14:49] irinuca2001ro: assets

[20:14:51] Salman: ahan....

[20:14:53] Salman: shoot shooot

[20:14:54] chrismar112003: goods held for sale

[20:14:54] priti: goods held for sale

[20:14:55] misery108: material, work in progress, and finished goods

[20:15:02] irinuca2001ro: held for sale

[20:15:05] Salman: {misery108} good

[20:15:12] Salman: so

[20:15:14] Salman: its like

[20:15:16] irinuca2001ro: inished goods

[20:15:20] anastasia270683: in normal course of business, so not investment property..

[20:15:24] Salman: 1. assets held for sale in the ordinary course of business

[20:15:26] irinuca2001ro: work in progress

[20:15:35] Salman: 2. assets in the process of production for such sale

[20:15:53] misery108: ok

[20:16:00] Salman: 3. assets in the form of material or supplies to be consumed in the production process or in the rendering of services

[20:16:04] Salman: are we cool?

[20:16:09] gaboosm: yeah

[20:16:10] anastasia270683: yeah

[20:16:12] paula13: yep

[20:16:12] Salman: ok

[20:16:15] Salman: so...

[20:16:16] irinuca2001ro: yes

[20:16:16] Salman: you said

[20:16:17] sichom02: yaeh



5


[20:16:21] Salman: that Inventories are valued

[20:16:25] Salman: at less of

[20:16:30] Salman: cost or inventory

[20:16:33] Salman: right

[20:16:34] Salman: ?

[20:16:39] mohdqaq: cost or NRV

[20:16:40] davisdadon: cost or nrv

[20:16:42] anastasia270683: cost or nrv

[20:16:44] anastasia270683: :)

[20:16:47] gaboosm: cost or nrv

[20:16:47] sichom02: less cost and nrv

[20:16:49] paula13: cost or NPV

[20:17:03] Salman: what will happen mostly?

[20:17:08] Salman: will it be valued at cost/

[20:17:09] anastasia270683: cost

[20:17:09] mohdqaq: cost

[20:17:12] Salman: or NRV?

[20:17:13] misery108: cost is lower

[20:17:16] Salman: ahan

[20:17:17] Salman: tell me

[20:17:19] Salman: WHEN?

[20:17:23] Salman: is NRV low/

[20:17:24] Salman: ?

[20:17:35] mohdqaq: when cost is high

[20:17:36] misery108: change in technology

[20:17:43] davisdadon: obsolete inventory

[20:17:44] irinuca2001ro: increase in cost

[20:17:48] davisdadon: damaged inventory

[20:17:54] irinuca2001ro: or fall in selling price

[20:17:55] sichom02: yes unless deliberate attempt to reduce sp to encourage sales


[20:17:57] davisdadon: sales price drops

[20:18:01] priti: NRV is lower when errors in production

[20:18:03] irinuca2001ro: ph deter

[20:18:04] Salman: {sichom02} good one

[20:18:04] mohdqaq: fall in selling price



6


[20:18:08] Salman: cool

[20:18:09] Salman: :D

[20:18:09] sichom02: if inventory is absolete

[20:18:14] Salman: yep

[20:18:20] Salman: what about

[20:18:21] sichom02: :d

[20:18:25] irinuca2001ro: error in production

[20:18:27] Salman: pyhisical deterioration

[20:18:28] Salman: ah

[20:18:30] mohdqaq: production faults

[20:18:31] Salman: ok davisd said it

[20:18:36] Salman: Damaged inventory

[20:18:46] Salman: errors in production

[20:18:49] Salman: as irinuca said

[20:18:50] davisdadon: :) i want my chicken dinner

[20:18:52] irinuca2001ro: decision to sell in loss

[20:18:55] Salman: You will get it

[20:19:00] Salman: I got some business with you ;)

[20:19:10] Salman: or some market strategy

[20:19:21] Salman: to sell products at loss

[20:19:28] irinuca2001ro: i told you

[20:19:33] gaboosm: loss leader

[20:19:36] Salman: most companies do that just to increase the market share

[20:19:45] Salman: {gaboosm} what was that?

[20:20:10] misery108: eg for strategy to sell at loss, pls

[20:20:23] Salman: sometimes

[20:20:27] gaboosm: sorry that doesnt apply here

[20:20:34] Salman: we buy inventory at different times of the year

[20:20:42] Salman: so their prices might not be same

[20:20:57] Salman: so we use some estimation methods

[20:21:01] Salman: at the year end

[20:21:04] mohdqaq: FIFO

[20:21:06] priti: FIFO

[20:21:09] Salman: ahan

[20:21:09] Salman: and

[20:21:11] Salman: ..?



7


[20:21:16] Suviez: LiFO

[20:21:17] paula13: weighted average

[20:21:18] gaboosm: fifo or weighter avergae cost

[20:21:19] mohdqaq: weighted avaerage

[20:21:21] priti: Weighted average cost

[20:21:25] irinuca2001ro: FIFO LIFO AVCO

[20:21:31] mohdqaq: LIFO is restricted

[20:21:32] priti: {Suviez} Lifo not permitted

[20:21:34] Salman: {irinuca2001ro} {Suviez} LIFO is not permitted now..ok?

[20:21:41] Suviez: ok

[20:21:42] irinuca2001ro: STANDARD COST AND RPLACEMENT COST

[20:21:44] Salman: and

[20:21:54] Salman: entity must use the same cost formula

[20:21:56] irinuca2001ro: yes, not permited

[20:21:58] Salman: for all the inventories

[20:22:03] Salman: having a similar nature

[20:22:09] Salman: or use to the entity

[20:22:12] anastasia270683: Salman in your notes it says that FIFO is using latest purchases or production, is that right??

[20:22:20] Salman: yes

[20:22:24] Salman: thats right

[20:22:32] anastasia270683: should it not be the earliest?

[20:22:37] Salman: Quantities in hand

[20:22:45] davisdadon: {anastasia270683} the first in is usually the oldest

[20:22:53] Salman: REPRESENTS the lates purchases or production

[20:22:55] Salman: ;)

[20:23:01] mohdqaq: where the notes are

[20:23:11] Salman: {mohdqaq} Dint u receive the EMAIL? :S

[20:23:18] davisdadon: {Salman} watch salman get mad now :)

[20:23:21] Salman: and they are available on the forums

[20:23:35] mohdqaq: may be I cant see I see IAS16 38 and other

[20:23:37] davisdadon: http://opentuition.com/groups/f7-financial-reporting/forum/topic/all-chat-histories-notes-andanswers-of-study-group-dec-2010/

[20:23:42] Salman: {davisdadon} no

[20:23:44] anastasia270683: ok, i will think about it but im not convinced yet, i thought the latest urchases are used to value stock under LIFO



8


[20:23:44] Salman: not yet :P

[20:23:47] Salman: {mohdqaq} here u go

[20:23:55] Salman: {mohdqaq} http://opentuition.com/wp-content/blogs.dir/1/files/groupdocuments/13/1286402970-IAS2and11InventoryandConstructionContracts.pdf

[20:23:58] Salman: {mohdqaq} download

[20:24:02] Salman: and join F7 group

[20:24:07] Salman: so that u receive the emails

[20:24:34] Salman: we are finished with IAS 2

[20:24:35] Salman: ok?

[20:24:39] irinuca2001ro: ok

[20:24:44] davisdadon: {anastasia270683} First in... 1 comes before 2... First out... sell 1 before 2

[20:24:54] Salman: we will only get questions on scope, objective, NRV less than COST

[20:24:57] Salman: thats it

[20:24:57] sichom02: soory guys a quick recap. i had to move from a noisy palce and and lost track

[20:25:01] Salman: and valuation

[20:25:16] Salman: {sichom02} read the chat history later

[20:25:17] Salman: ok?

[20:25:22] irinuca2001ro: ok

[20:25:22] Salman: sorry about that

[20:25:22] sichom02: ok

[20:25:27] Salman: I will try to recap

[20:25:31] Salman: if i got time in the end

[20:25:35] sichom02: cool

[20:25:37] Salman: but I have to solve 3 questions today

[20:25:41] Salman: so time constraint

[20:25:44] anastasia270683: ok thanks davisdadon :)

[20:25:46] Salman: moving to IAS 11

[20:25:58] Salman: what is the objective of IAS 11?

[20:26:10] gaboosm: how to value construction contracts

[20:26:11] irinuca2001ro: construction contract

[20:26:26] Ansi: to provide accounting guidance for construction contracts :)

[20:26:30] Salman: {irinuca2001ro} objective

[20:26:32] irinuca2001ro: to rcognize cost and revenue

[20:26:37] Salman: ok ok

[20:26:40] Salman: u already know that

[20:26:44] Salman: just change the words



9


[20:26:51] irinuca2001ro: me?

[20:27:01] Salman: What times of Construction Contracts do we have?

[20:27:09] sichom02: prescribe traetmnt of revenue and cost associated wth construction contracts

[20:27:21] davisdadon: Fixed price and cost plus contract

[20:27:23] priti: fixed price

[20:27:26] davisdadon: and its types not time

[20:27:28] priti: cost plus

[20:27:36] irinuca2001ro: fixed and plus cost

[20:27:36] Salman: oooops

[20:27:37] Salman: :P

[20:27:45] Salman: I wanted to say TYPES

[20:27:45] Salman: :D

[20:27:47] chrismar112003: to decide the cost and revenue to include in the financial statements at different stages of a contract

[20:27:49] Salman: My times is wrong :(

[20:27:53] misery108: time:P

[20:27:54] Salman: Sorry fellas

[20:28:09] Salman: also trying to make a friend happy here, got upset at me last night :P

[20:28:21] Salman: so what are Fixed Price Contracts?

[20:28:22] Ansi: :)

[20:28:25] gaboosm: fixed price and cost pluss contracts

[20:28:27] Salman: and Cost Plus Contracts?

[20:28:32] davisdadon: {Salman} alan right?

[20:28:39] Salman: {davisdadon} to hell with alan

[20:28:42] gaboosm: price is fixed at the start of the contract

[20:28:43] Salman: and all other mods

[20:28:53] priti: agreed fixed price for the contract

[20:28:54] chrismar112003: A set price is agreed at the beginning at the contract

[20:29:04] davisdadon: moving on

[20:29:10] davisdadon: lol


[20:29:19] Salman: I got business with you

[20:29:20] sichom02: agreed fixed contarct price

[20:29:24] Salman: wait for it

[20:29:35] Salman: so someone gave me a definition?

[20:29:40] sichom02: or fixed rate per unit of output



10


[20:29:42] Salman: for Fixed Contract price?

[20:29:45] Salman: {sichom02} ahan

[20:29:54] sichom02: sup?

[20:29:57] Salman: well

[20:30:01] irinuca2001ro: is fix price

[20:30:02] Salman: in Fixed Contract price

[20:30:03] starsonhigh: fixed price contract is when contractors agrees to a fixed contract price

[20:30:08] Salman: u just need to remember one thing

[20:30:13] Salman: the Contractor Bears.

[20:30:21] Salman: while in the Cost Plus Contractors

[20:30:24] Salman: the Contractee bears

[20:30:25] anastasia270683: where outcome can be estimated reliably

[20:30:26] davisdadon: A Fixed price contrat is a contract in which the contractor agrees to a fixed contract price

[20:30:27] priti: cost plus is allowable cost + a % of these costs


[20:30:41] irinuca2001ro: plus pocentage, plus diferent cost

[20:30:44] davisdadon: question then

[20:30:58] sichom02: :yes:

[20:31:01] Salman: ermm...

[20:31:07] Salman: i was going through my notes

[20:31:08] davisdadon: can it be said that it is impossible to make a loss on cost price contracts?

[20:31:21] Salman: if something else is needed to be discussed before questions

[20:31:23] davisdadon: but it is possible with a a fixed cost?

[20:31:46] davisdadon: {Salman} i meant i have a question

[20:31:49] anastasia270683: {davisdadon} i think so davisdadon..

[20:31:57] priti: contractor Bears, contractee Bears? can you explain?

[20:32:08] Salman: {davisdadon} I think it can be said :S

[20:32:10] Salman: isnt it?

[20:32:15] davisdadon: yeah

[20:32:23] Salman: cuz all the costs are remimbursed

[20:32:28] anastasia270683: unless a contractor is dodgy and is making the costs up lol

[20:32:29] davisdadon: got it

[20:32:39] davisdadon: {Salman} now explain tp priti

[20:32:39] Salman: {anastasia270683} lol yeah


[20:32:46] Salman: explaining that



11


[20:32:49] Salman: Oriti

[20:32:54] Salman: lol

[20:32:56] Salman: Priti*

[20:33:33] Salman: as we say that the fixed price contract is the one in which the contractor agrees to a fixed contract price or a rate whatever

[20:33:40] Salman: means he will be paid a fixed amount

[20:33:45] Salman: so what if something happens

[20:33:51] Salman: and the price inflates

[20:33:52] Salman: etc

[20:33:58] Salman: he still will get the same amount

[20:34:02] Salman: so he will bear the cost

[20:34:03] Salman: got it?

[20:34:09] irinuca2001ro: yes

[20:34:13] sichom02: yeaah

[20:34:13] priti: yeap

[20:34:14] misery108: yep

[20:34:18] Salman: and in the cost plust, he will reimbursed with the cost

[20:34:24] Salman: that occurs above the fixed

[20:34:29] Salman: so ofcourse then

[20:34:32] Salman: he contractee bears

[20:34:34] Salman: ...

[20:34:37] Salman: the*

[20:34:40] Salman: NOW

[20:34:44] Salman: to test your knowledge

[20:34:45] Salman: ;)

[20:34:49] Salman: a question from IAS 2

[20:34:50] Salman: :D

[20:34:51] priti: ok sool

[20:34:52] Salman: ready?

[20:34:54] priti: cool*

[20:34:56] Ansi: :D:D:D

[20:34:57] davisdadon: ready

[20:35:13] sichom02: :d

[20:35:26] Salman: Equipment constructed for a customer for an agreed price of $18,000. This has recently been completed at a cost of $16,800. It has now been discovered that, in order to meet certain regulations, conversion with an extra cost of $4,200 will be required.



12


[20:35:35] Salman: The customer has accepted partial responsibility and agreed to meet half the extra cost.

[20:35:51] Salman: At what price will the Equipment be valued?

[20:36:25] davisdadon: 16800+2100

[20:36:25] anastasia270683: 16800+4200/2=18900 ?

[20:36:32] misery108: $18900

[20:36:36] mohammedtj: 18900

[20:36:53] sichom02: 1890

[20:36:59] Salman: Think





[20:37:03] sichom02: oops 18900

[20:37:05] anastasia270683: or is that 18000 because orice is agreed??

[20:37:05] paula13: 18000

[20:37:06] irinuca2001ro: 21000

[20:37:09] chrismar112003: 18000

[20:37:12] mohammedtj: 18000

[20:37:20] Salman: *burp*

[20:37:23] Salman: I ate the chicken

[20:37:27] anastasia270683: lol

[20:37:29] Salman: none of u deserved it

[20:37:30] Salman: :(

[20:37:35] irinuca2001ro: 18000

[20:37:36] Salman: WRONG WRONG answers

[20:37:37] paula13: or 18000 + 2100 ?

[20:37:38] anastasia270683: sorry

[20:37:38] Salman: ok look

[20:37:40] Salman: WAIT

[20:37:41] Salman: WAIT now

[20:37:43] anastasia270683: Paula deserves it

[20:37:43] Salman: COOL DOWN

[20:37:44] Salman: look

[20:37:44] sichom02: 20100

[20:37:50] Salman: paula is wrong too

[20:37:54] paula13: :(



13


[20:37:56] Salman: WILL YOU ALL STOP IT NOW

[20:38:00] Salman: we said

[20:38:04] Salman: Lower of COST

[20:38:06] Salman: and NRV

[20:38:10] Salman: then What is COST?

[20:38:14] Salman: and What is NRV?

[20:38:18] Salman: Try to remember them....

[20:38:22] Salman: and solve again

[20:38:26] anastasia270683: could you copy the qstn again?

[20:38:30] Salman: till then I am frying one MORE CHICKEn

[20:38:33] sichom02: yeah

[20:38:42] Salman: Equipment constructed for a customer for an agreed price of $18,000. This has recently been completed at a cost of

$16,800. It has now been discovered that, in order to meet certain regulations, conversion with an extra cost of $4,200 will be required.

[20:38:44] irinuca2001ro: what is the purchased price?

[20:38:58] Salman: The customer has accepted partial responsibility and agreed to meet half the extra cost. At what price will the Equipment be valued?

[20:39:07] mohammedtj: 16800

[20:39:15] irinuca2001ro: aditional cost is 4200?

[20:39:24] eizza: 16800

[20:39:25] Salman: {irinuca2001ro} cant u see up there?

[20:39:28] irinuca2001ro: then 18000-42oo

[20:39:32] Salman: WRONG ANSWERS

[20:39:34] anastasia270683: sugar its 16800 isnt it?

[20:39:40] misery108: $19500ok


[20:39:44] Salman: am I sugar? :P

[20:39:48] Salman: I am Beast..

[20:39:50] Salman: ask ANSI

[20:39:50] Salman: :P

[20:39:52] anastasia270683: lol :)

[20:39:56] moltres89: {Salman} you're hopeless :p

[20:40:02] Salman: {moltres89} you are girl-less

[20:40:03] Salman: :P



14


[20:40:07] Ansi: {Salman} yea ask me :D

[20:40:09] mohdqaq: 16800 + 2100 = 18900 is cost 18000 in nrv is it

[20:40:12] Salman: WRONG

[20:40:16] moltres89: {Salman} i'm not complaining ;)

[20:40:17] sichom02: now i ahve a headache

[20:40:18] Salman: you all are gonna fail

[20:40:19] Salman: :P


[20:40:23] irinuca2001ro: 12600

[20:40:25] anastasia270683: is 16800 wrong too??

[20:40:28] Salman: haha

[20:40:29] Salman: ok ok

[20:40:32] moltres89: {Salman} love the motivation :p

[20:40:35] Salman: dont force ur mind so much

[20:40:39] Salman: {moltres89} when I solve it

[20:40:42] Salman: they get motivated ;)

[20:40:45] Salman: Thats how I roll :D

[20:40:47] Salman: OK guys

[20:40:49] Salman: now look

[20:40:50] priti: cost is 21000 18000 is NRV

[20:40:54] Salman: Errrr

[20:40:58] Salman: STOP IT NOW

[20:41:02] eizza: 15900

[20:41:04] Salman: You all had your bites

[20:41:08] Salman: leave the chicken to me

[20:41:09] Salman: :O

[20:41:11] Salman: DAMN!

[20:41:14] Salman: Eizza ate it

[20:41:16] Salman: :(

[20:41:22] Salman: Congratulations Eizza

[20:41:23] Salman: :D

[20:41:35] moltres89: Yay!

[20:41:40] Salman: {moltres89} :O

[20:41:43] sichom02: how?

[20:41:45] davisdadon: {Salman} explain!? i wanted chicken

[20:41:48] Salman: {moltres89} why are you like \m/



15


[20:41:49] Salman: :P

[20:41:52] Salman: lol ok

[20:41:54] moltres89: {sichom02} yeah! explain!

[20:41:55] Salman: Eizza? :O

[20:41:58] Salman: she went away

[20:42:02] Salman: I thought she would Explain

[20:42:03] Salman: anyway

[20:42:06] moltres89: it was a he

[20:42:06] Salman: I am explaining

[20:42:18] Salman: yeah You know better, I never had boyfriends

[20:42:19] chrismar112003: 18000-2100

[20:42:31] Salman: {chrismar112003} how? can u explain? or just saying it ;)

[20:42:32] Ansi: {Salman} good to know :D

[20:42:32] mohdqaq: 18000-4200+2100

[20:42:40] Salman: {mohdqaq} lol

[20:42:49] Salman: simply subtract 2100

[20:42:50] moltres89: {mohdqaq} that's classic

[20:42:54] Salman: haha

[20:43:01] Salman: ok should I explain?

[20:43:05] Salman: too much time wasted

[20:43:07] davisdadon: {Salman} explain

[20:43:09] paula13: please...

[20:43:14] Salman: The cost was 18000

[20:43:15] Salman: ok?

[20:43:16] moltres89: pleaseee!!

[20:43:17] priti: {Salman} explain

[20:43:17] sichom02: pls do

[20:43:32] Salman: then the Cost at which it got completed was 16800

[20:43:42] anastasia270683: cost to who? to us or our customer?

[20:43:48] Salman: to the company

[20:43:52] anastasia270683: or our supplier? im confused. who are we?

[20:44:10] anastasia270683: are we constructing something to sell to our customer?

[20:44:12] Salman: then we came to know that we need to incurr some more cost, conversion costs, to make it available for sale...

[20:44:16] moltres89: {Salman} who are you :o

[20:44:17] sichom02: {anastasia270683} :sleep:



16


[20:44:40] sichom02: so that reduces our nv

[20:44:42] Salman: {anastasia270683} I posted the question 2 times

[20:44:48] Salman: and there was written CLEARLY

[20:44:50] Salman: BIG BIG

[20:44:51] anastasia270683: ok, sorry

[20:45:03] irinuca2001ro: ias 2, nothing to construct

[20:45:03] Salman: Equipment CONSTRUCTED FOR A CUSTOMER

[20:45:09] anastasia270683: ok

[20:45:13] davisdadon: {Salman} i am still loss can you post the question then explain

[20:45:16] moltres89: {Salman} which customer?

[20:45:22] moltres89: individual or a company?

[20:45:34] Salman: Equipment constructed for a customer for an agreed price of $18,000. This has recently been completed at a cost of

$16,800. It has now been discovered that, in order to meet certain regulations, conversion with an extra cost of $4,200 will be required.

[20:45:43] Salman: The customer has accepted partial responsibility and agreed to meet half the extra cost. At what price will the Equipment be valued?

[20:45:48] sichom02: i get it. we shud have realised 18000 but incurred extra cost of 2100 thus reduccing nrv to 15900. nice.

[20:45:58] Salman: *phew*

[20:46:01] Salman: others got it?

[20:46:04] Ansi: :D:D lol

[20:46:09] priti: ok

[20:46:12] moltres89: {sichom02} :star:


[20:46:25] sichom02: {moltres89} :d

[20:46:28] Salman: reducing the NRV

[20:46:34] Salman: and then COST and NRV compared

[20:46:36] Salman: and NRV less

[20:46:42] Salman: so recognised at 15900

[20:46:45] Salman: that is the NRV

[20:46:50] Salman: someone still confused? =S

[20:46:53] davisdadon: ????

[20:47:02] moltres89: {Salman} now we need to realise why was the extra cos incurred!!

[20:47:04] irinuca2001ro: why we need 2 information, agreed price and complet price?



17


[20:47:09] sichom02: {davisdadon} dude!!!!!!

[20:47:12] davisdadon: i'm still loss

[20:47:20] Ansi: omg ...salman good luck :D:D

[20:47:24] anastasia270683: i got it now...thank you

[20:47:27] davisdadon: what exactly is the 18000?

[20:47:27] moltres89: {davisdadon} we all are. i am on weekends only

[20:47:41] sichom02: {davisdadon} the agreed price

[20:47:42] moltres89: {davisdadon} original contract cost

[20:47:51] chrismar112003: agreed cost of contract

[20:48:11] davisdadon: and what cost did we incurr?

[20:48:24] mohdqaq: 18000 is NRV because it is estimated selling price is it SALMAN

[20:48:36] chrismar112003: additional 2100 for conversion which is half of 4200

[20:48:41] moltres89: {davisdadon} more than 18000!

[20:48:55] sichom02: {davisdadon} originally 16800 but extra 4200/2=2100

[20:48:55] davisdadon: true but that would make the NRV greater than cost

[20:49:02] anastasia270683: 18,000 is the price we agreed with customer so doesnt matter what we bear this price, then we incurred some extra costs with were 4200 however agreed to contribute to it 2100 so our nrv = 18000 + 4200 -

2100

[20:49:25] anastasia270683: but cost is 16800, so nrv is lower at 15900

[20:49:33] davisdadon: oh

[20:49:35] sichom02: {davisdadon} not really, costs are reduced from sp

[20:50:01] Salman: the 18000 is the original contract cost, and then the actual cost that incurred was 16800 <---

COST........after that we came to know that we need to incurr some cost of 4200, out of which company paid 2100...so we subtract 2100 and get to the figure of 15900 at which it is available for sale

[20:50:08] Salman: 15900 is thus the NRV

[20:50:09] Salman: :S

[20:50:13] mohdqaq: {anastasia270683} 8000 + 4200 -2100 = ?

[20:50:18] Salman: *headache*

[20:50:24] mohdqaq: hahaha

[20:50:27] Salman: I brb from drinking water

[20:50:30] sichom02: tell me about i

[20:50:36] moltres89: {Salman} poor dude

[20:50:41] priti: cost = 16800 NRV = 15900

[20:50:50] anastasia270683: {mohdqaq} sorry 18000 -4200+2100

[20:51:01] mohdqaq: 18000 is NRV because it is estimated selling price is it SALMAN ???

[20:51:10] sichom02: {davisdadon} you cool?

[20:51:34] davisdadon: i believe so



18


[20:51:35] gaboosm: cost 16800 nrv 15900

[20:51:36] anastasia270683: {mohdqaq} yes 18000 would be NRV if we didnt incure extra costs

[20:52:08] sichom02: neat

[20:52:16] anastasia270683: but 4200 was extra costs which is extra cost to sell , of which 2100 was paid by customer so our nrv is 18000 - extra cost to us to sell 2100

[20:52:49] davisdadon: maybe i should have responded more positively

[20:52:52] davisdadon: I GOT IT

[20:52:57] davisdadon: :) thanks all

[20:53:02] sichom02: guys how do we traet expected losses on a contarct?

[20:53:27] mohdqaq: where is Mr SALMAN?

[20:53:30] davisdadon: {Salman} moving on

[20:53:37] sweety2009: Expensed at once

[20:53:47] anastasia270683: {sichom02} we haven't got to that bit yet, we are valuing inventories in this question

[20:53:56] sichom02: drinking water. thankxseety

[20:53:56] davisdadon: salman choking on a chicken bone

[20:53:58] gaboosm: losses are realised straight awat

[20:54:10] sweety2009: as you realise there will be a lost it must be taken toi soc

[20:54:17] Salman: sorry guys

[20:54:18] sichom02: {anastasia270683} wat can i do gal, i am on a roll here

[20:54:22] Salman: guests arrived :(

[20:54:25] Salman: I am back now

[20:54:26] Salman: Sichom

[20:54:30] Salman: discussing it now....

[20:54:32] anastasia270683: Salmon has probaly gone mad seeing how useless we all are :)

[20:54:54] sichom02: {Salman} ;)

[20:55:02] Salman: as u know

[20:55:03] davisdadon: {anastasia270683} :( im not useless

[20:55:14] Salman: first we calculate the precentage of completion

[20:55:28] Salman: and according to that we calculate of profit to be recognised

[20:55:38] anastasia270683: {davisdadon} {davisdadon} sorry i was joking

[20:55:47] Salman: the total profit can easily be calculated

[20:55:48] davisdadon: {anastasia270683} :p me too

[20:55:52] sichom02: ecognised at wat point?

[20:55:53] Salman: the method is available in the question

[20:55:59] Salman: =look

[20:56:08] Salman: there are 4 steps



19


[20:56:22] Salman: 1 step is where we calculate Expected OUTCOME

[20:56:46] Salman: we take the Contract Revenue and the total COST of Completion is subtracted

[20:56:47] Salman: ok?

[20:56:49] sweety2009: no gals around here


[20:57:02] Salman: so if the cost of completion is less that cost revenue

[20:57:09] Salman: then have an Expected Profit

[20:57:26] Salman: and at the 2nd stage we calculate the TO be recognised profit

[20:57:43] Salman: by multiplying the Expected Profit with the Percentage of Complettion


[20:57:52] sweety2009: ok

[20:57:56] Salman: but if at the First stage the Expected outcome is a LOSS

[20:58:15] sichom02: wats TO

[20:58:19] Salman: that is if the cost of completion of the cotract is MORE than the Contract Revenue

[20:58:23] chrismar112003: recognise total loss right away

[20:58:31] gaboosm: charge it to pandl

[20:58:33] Salman: then We get a loss in the Expected Outcome

[20:58:36] Salman: and we Charge it

[20:58:40] Salman: ok/

[20:58:53] Salman: {sichom02} To be recognised profit I meant..

[20:58:57] Salman: u will understand it

[20:59:01] Salman: when we solve a question

[20:59:02] Salman: ok?



[20:59:14] paula13: ok

[20:59:14] Salman: first lets solve a small question...

[20:59:15] jackchitan: Agreed

[20:59:18] Salman: so that u understand it

[20:59:24] Salman: then we solve those 3 big questions...


[20:59:57] sweety2009: ok

[21:00:01] Salman: Softfloor House Limited make café bars. The projects generally take a number of months to complete. The company has three contracts in progress at the year ended 30 April.

[21:00:02] sichom02: cool

[21:00:07] Salman: Costs incurred to date 200



20


[21:00:12] Salman: Costs to complete 200

[21:00:16] Salman: Contract price 600

[21:00:20] Salman: Progress billings 40

[21:00:30] Salman: Softfloor calculates the percentage of completion by using the costs incurred compared to the total costs.

[21:00:31] Salman: NOW

[21:00:33] Salman: Let me do it

[21:00:37] Salman: you all just note down

[21:00:38] Salman: ok?


[21:00:45] anastasia270683: ok

[21:00:51] paula13: ok

[21:00:54] priti: ok

[21:00:57] Salman: STEP 1.

[21:01:05] Salman: We calculate the Expected OUTCOME

[21:01:18] davisdadon: income?

[21:01:21] Salman: By Subtracting the Cost for completion out of the Contract price

[21:01:22] Salman: so

[21:01:44] priti: 600-200

[21:01:50] Salman: Contract price (600) - Cost of Comletion (200+200) = 200

[21:01:51] misery108: 400


[21:01:56] gaboosm: 600-200=400

[21:02:01] Salman: NO


[21:02:06] Salman: Contract price

[21:02:07] Salman: less

[21:02:13] sichom02: yes

[21:02:16] Salman: the Total Cost of Completion

[21:02:22] Salman: till date we incurred 200

[21:02:23] sweety2009: 400

[21:02:31] Salman: and to complete still 200 more to incur

[21:02:32] priti: yes sorry 600-200-200

[21:02:37] Salman: so total 400 to incurr

[21:02:39] sweety2009: ok

[21:02:48] Salman: thats why 600 - 200 - 200



21


[21:02:52] misery108: ok

[21:02:56] Salman: and we get a Expected OUtcome of 200

[21:03:00] Salman: note it down please

[21:03:01] sweety2009: ok

[21:03:06] Salman: now Step 2...

[21:03:20] Salman: we calculate the Stage of Completion

[21:03:34] Salman: that how much percentage of the contract have we completed

[21:03:42] paula13: 50% ?

[21:03:45] Salman: sometimes the question tell us how to calculate the percentage

[21:03:47] Salman: but here

[21:03:48] sweety2009: 400/600

[21:03:50] Salman: we will go like

[21:03:52] sichom02: 33

[21:03:58] Salman: cost INCURRED divided by THE TOTAL COST

[21:04:03] Salman: TOTAL COST is 400

[21:04:07] Salman: and INCURRED is 200

[21:04:12] sweety2009: ok

[21:04:22] sichom02: 50%

[21:04:24] sweety2009: 200/600

[21:04:26] Salman: so percentage of completion 200 / 400 X 100 = 50%


[21:04:37] sichom02: yebo yah

[21:04:38] sweety2009: 33%

[21:04:39] paula13: yeah

[21:04:47] Salman: {sweety2009} Cost Incurred divided by TOTAL COST

[21:04:53] Salman: {sweety2009} alright?

[21:05:11] sweety2009: ok

[21:05:13] Salman: now we will recognize that HOW Much Profit will we recognize

[21:05:22] Salman: we already calculated the Expected Outcome

[21:05:25] sweety2009: ok ok

[21:05:25] Salman: that was 200

[21:05:34] Salman: and the precentage of completion is 50%

[21:05:42] sichom02: 100

[21:05:43] sweety2009: yea yea

[21:05:44] mohdqaq: sorry salamn cost incurred or incured to dat

[21:05:45] paula13: 50% x 200 = 100



22


[21:05:51] Salman: so the Profit to recognize is then 200 X 50% = 100

[21:05:58] Salman: now

[21:06:00] Salman: Step3...

[21:06:42] Salman: Depending on the Extimated Outcome of the contract, calculate Revenue and Cost to be recognized in Financial Statement

[21:06:51] Salman: so what we do is that

[21:07:10] Salman: we take in this question the Cost

[21:07:12] sichom02: cost 200 revenue 100

[21:07:14] Salman: that is 200

[21:07:22] Salman: and the Revenue that is 100

[21:07:32] Salman: using both of them

[21:07:38] Salman: we calculate the Sales figure

[21:07:46] Salman: that would be ofcourse then 300


[21:07:58] sichom02: no

[21:07:59] davisdadon: yup

[21:08:05] Salman: look sichom

[21:08:10] Salman: I told u to take out a paper :(

[21:08:17] sichom02: i did

[21:08:22] Salman: write down Sales

[21:08:29] sichom02: ok

[21:08:30] Salman: and leave the space in front of it empty

[21:08:38] Salman: now write Costs under the Sales

[21:08:45] Salman: and at front of it write 200

[21:08:53] sichom02: ok

[21:08:56] Salman: under it WRite Revenue

[21:09:05] Salman: and at front of it Write the 100 expected revenue


[21:09:06] sichom02: ok

[21:09:09] Salman: when we

[21:09:16] Salman: Subtract Cost from Sale

[21:09:20] Salman: we will get the Revenue

[21:09:23] Salman: we have the revenue

[21:09:24] anastasia270683: {sichom02} copy a qstn into word so its in front of you , it will make it easier to understand

[21:09:26] Salman: we have the cost

[21:09:32] Salman: Calculate the Sale..



23


[21:09:35] Salman: u did?

[21:09:35] sichom02: ooooooooooooooooooooooooookkkkkkkkkkk :d


[21:09:44] mohdqaq: 300

[21:09:44] Salman: that is

[21:09:50] Salman: what goes to Income statement

[21:09:51] Salman: Ok?

[21:10:00] Salman: ok sichome?

[21:10:02] sichom02: ok


[21:10:06] Salman: Step 4...

[21:10:14] Salman: that is for the figures of SOFP

[21:10:24] Salman: we do it as this

[21:10:29] Salman: we take the Cost Incurred

[21:10:46] Salman: we add the Profit Recognized to it

[21:10:52] Salman: here we have the Cost of 200

[21:11:00] Salman: incurred I mean

[21:11:07] Salman: and the recognized profit we have 100

[21:11:08] Salman: ok?

[21:11:16] paula13: yep

[21:11:18] Salman: under it we Less the Loss recognized if any

[21:11:31] Salman: and under that we Less the Progress billings

[21:11:37] Salman: that we have here 400

[21:11:39] Salman: 40*

[21:11:46] Salman: so we get our Balance figure

[21:11:49] Salman: how much we got?

[21:11:56] mohdqaq: 260

[21:12:00] priti: 260

[21:12:09] Salman: others got the same?

[21:12:15] sichom02: 260

[21:12:16] paula13: 260

[21:12:23] davisdadon: 260


[21:12:27] Salman: that is Positive

[21:12:30] Salman: so that is something

[21:12:31] starsonhigh: yes



24


[21:12:37] Salman: that we still gonna get from the Customer

[21:12:41] Salman: so we write it as

[21:12:54] Salman: Gross Amount due FROM customers

[21:12:55] Salman: ok?

[21:13:00] paula13: ok

[21:13:08] sichom02: ok

[21:13:08] Salman: Sichom got it?

[21:13:12] Salman: *phew* :P

[21:13:18] Salman: Case 2....for you people

[21:13:22] sichom02: very funny

[21:13:26] Salman: we will go with the Steps

[21:13:31] Salman: 1, 2, 3 and 4

[21:13:36] Salman: {sichom02} that was meant to be funny

[21:13:39] Salman: dont be harsh now

[21:13:55] Salman: Costs incurred to date 600

[21:13:57] davisdadon: i neen a nmemonic for those steps

[21:14:04] sichom02: :d

[21:14:07] Salman: Costs to complete 200

[21:14:15] Salman: Contract price 750

[21:14:23] Salman: Progress billings 630

[21:14:37] Salman: SO

[21:14:39] Salman: Step 1....

[21:14:47] Salman: Expected Outcome....how much?

[21:14:52] chrismar112003: theres a loss of 50

[21:15:07] mohdqaq: 750-800 = 50 loss

[21:15:11] Salman: others...?

[21:15:13] anastasia270683: yes 50 loss

[21:15:14] Salman: hurry..

[21:15:17] Salman: ok...

[21:15:20] Salman: Step 2....

[21:15:21] paula13: 50 loss

[21:15:26] priti: 50 loss

[21:15:27] gaboosm: 50 loss

[21:15:29] Salman: Recognized profit or loss.

[21:15:35] Salman: according to stage of completion...

[21:15:36] mohdqaq: loss



25


[21:15:42] jackchitan: expected 550

[21:15:52] Salman: that is Step 3 :D

[21:15:55] Salman: So in Step 2

[21:15:56] sichom02: 50 loss

[21:15:59] Salman: we take LOSS as it is

[21:16:03] Salman: coming to Step 3

[21:16:08] Salman: calculate Sales figure

[21:16:14] Salman: by using Cost and Loss figure

[21:16:20] Salman: cost is 600

[21:16:22] Salman: loss is 50

[21:16:27] Salman: how much sales figure?

[21:16:34] mohdqaq: sals 550

[21:16:37] paula13: 550

[21:16:40] priti: 550

[21:16:42] jackchitan: 750

[21:16:43] sichom02: 550


[21:16:46] Salman: {jackchitan} :O

[21:16:51] gaboosm: 550

[21:16:59] jackchitan: sales figure 750

[21:17:03] anastasia270683: sales figure 600?

[21:17:22] paula13: 600-50 = 550

[21:17:22] Salman: Sales Figure will be 550

[21:17:23] anastasia270683: no 550

[21:17:29] Salman: not 750 Jack

[21:17:30] sichom02: {anastasia270683} {jackchitan} how?

[21:17:36] Salman: write 50 in the loss area

[21:17:40] Salman: and Cost 600

[21:17:43] Salman: cost is negative

[21:17:45] anastasia270683: yeah got it

[21:17:49] Salman: loss is negative

[21:17:55] Salman: but u have to add loss to cost

[21:17:58] Salman: to get the upper figure

[21:18:05] Salman: that is then....550


[21:18:11] anastasia270683: yes



26


[21:18:13] Salman: Jackchitan...?

[21:18:25] Salman: now coming to Step 4...

[21:18:28] Salman: SOFP figures..

[21:18:36] jackchitan: got it

[21:18:39] Salman: calculate....

[21:18:57] Salman: Gross due TO or FROM customers?

[21:19:00] Salman: and HOW MUCH?

[21:19:22] mohdqaq: 600-50-progress bill = ?

[21:19:28] paula13: 80 due to customers

[21:19:34] anastasia270683: 80 in accounts payable?

[21:19:41] mohdqaq: -200

[21:19:45] Salman: {mohdqaq} progress bills is 630

[21:19:48] sichom02: 80 due to customer

[21:20:11] mohdqaq: ok its -80

[21:20:26] mohdqaq: it means its papyable is it

[21:20:26] chrismar112003: 80 owed to customer


[21:20:43] Salman: 80 owed

[21:20:45] Salman: ALL GOT IT?

[21:20:56] anastasia270683: yeah, phew...

[21:20:57] Salman: please be fast now

[21:20:58] paula13: yeah

[21:21:02] Salman: I have got sever headache

[21:21:03] Salman: :(

[21:21:03] sichom02: :yes:

[21:21:07] davisdadon: can you go over that

[21:21:08] Salman: I am here just for my love


[21:21:14] Salman: :love:

[21:21:16] priti: yeh

[21:21:18] mohdqaq: then 80 is where stand in Sofp

[21:21:20] gaboosm: yeh

[21:21:25] davisdadon: i missed alot just now

[21:21:27] sichom02: {priti} i love u too man

[21:21:28] Salman: now we gonna do the Big 3 questions...

[21:21:31] Salman: {davisdadon} what happened?



27


[21:21:44] davisdadon: {Salman} promise you wont get mad

[21:21:50] sichom02: {Salman} {priti} sorry prety that was for

[21:22:11] Salman: {davisdadon} lol Did I ever get mad at Sichom? :P

[21:22:11] davisdadon: someone came in the room and distracted me...

[21:22:15] sichom02: lets do this

[21:22:17] davisdadon: LOL

[21:22:19] Salman: shoot it

[21:22:34] davisdadon: ok step 1 is expected income

[21:22:43] davisdadon: which i calculated at a loss

[21:22:46] davisdadon: is that correct?

[21:22:55] anastasia270683: yes loss 50

[21:23:01] Salman: yea

[21:23:07] Salman: then step 2 is skipped

[21:23:08] sichom02: toady i am on track left the dumness to davis

[21:23:08] davisdadon: step 2 is percentage

[21:23:10] Salman: cuz if its profit


[21:23:24] Salman: then we calculate the recognized profit

[21:23:26] Salman: but if its loss

[21:23:29] Salman: it will stay loss

[21:23:35] Salman: so we go to step 3

[21:23:38] Salman: we have loss figure

[21:23:39] anastasia270683: is step 2 is percentage, but so we have to calculate it as we swont use it anywhere int his qst"

[21:23:44] Salman: we have cost figure

[21:23:53] Salman: and we can calculate the Sales figure

[21:24:15] davisdadon: which is the contract price?

[21:24:24] anastasia270683: {Salman} so we wont lose any marks if we dont calculate percentage here?

[21:24:27] Salman: 750

[21:24:33] davisdadon: right

[21:24:37] Salman: {anastasia270683} NO, In LOSS we dont calculate it

[21:24:44] sichom02: {davisdadon} no which is revnue less cost

[21:24:44] anastasia270683: ok thanks

[21:25:31] Salman: Davisdadon

[21:25:34] Salman: UNDERSTOOD?



28


[21:25:38] anastasia270683: {davisdadon} we know cost incurred figure 600 and we know loss is 50 so we can calculate sales figure as a balancing figure

[21:25:51] anastasia270683: that was step 3

[21:25:55] sichom02: {anastasia270683} neat

[21:26:19] Salman: {sichom02} but you were doing this ---> :sleep: to Anastasia a while ago :D

[21:26:20] Salman: :P

[21:26:29] Salman: Davisdadon :X

[21:26:34] Salman: we are waiting for you :(

[21:26:35] davisdadon: im here

[21:26:37] anastasia270683: then to work our a bal sheet figure we take costs incurred 600 less loss 50 less progress billings 630 = -80 - this is negative so its not a creditor but debtor

[21:26:40] sichom02: {Salman} shes awake now

[21:26:42] Salman: I seriously have got a sever headache

[21:27:06] davisdadon: im following anastasia's comments

[21:27:21] sichom02: {Salman} you wANT US TO END HERE? ITHATS COOL U KNW

[21:27:28] anastasia270683: Salman i'll give you a head massage after a session ;)


[21:28:01] davisdadon: after "a" session or after "the" session

[21:28:02] Salman: Davisdadon?

[21:28:05] Salman: are u done now?


[21:28:10] davisdadon: im good

[21:28:12] Salman: ok

[21:28:19] Salman: ALL OF YOU HAVE GOT THE DOCUMENT?

[21:28:24] Salman: THE NOTES FOR IAS 11??

[21:28:27] priti: yeah

[21:28:29] sichom02: YEP

[21:28:34] Salman: I NEED ALL OF YOU TO SAY IT RIGHT NOW


[21:28:34] paula13: yep

[21:28:36] jackchitan: yep

[21:28:41] Salman: ONCE WE ARE DOING THE QUESTION DONT SAY IT THEN

[21:28:44] Salman: ALL GOT IT?

[21:28:44] Salman: ?

[21:28:46] sweety2009: yea

[21:28:51] Salman: MOHDQAQ????



29


[21:28:54] gaboosm: yes

[21:28:55] Salman: all got?

[21:28:57] Salman: all got?


[21:29:11] mohdqaq: ya

[21:29:19] Salman: ok open it

[21:29:21] Salman: go down now

[21:29:21] mohdqaq: little bit

[21:29:28] Salman: Question no. 1

[21:29:35] mohdqaq: after session I will practice for IAS 11

[21:31:25] mohdqaq: {Salman} plz move on

[21:31:37] Salman: do the question !

[21:31:38] Salman: 1

[21:31:48] Salman: I am waiting for you people

[21:31:50] Salman: do that question

[21:32:31] chrismar112003: Profit 20000, percentage complete 60%, Sales 92000, due from customers 42

[21:33:23] chrismar112003: 42000profit recognise 12000, due from customer 42000

[21:33:24] mohdqaq: step one>>>> expected out come 20,000

[21:33:36] mohdqaq: Sales 60,000 in step 2

[21:33:47] mohdqaq: sorry in step 3*

[21:34:39] chrismar112003: Sales 68000

[21:34:46] sichom02: expected outcome 20000, sales rae 68000 and 60% complete

[21:34:46] jackchitan: expeted income 68000

[21:35:16] jackchitan: step 2 is 60%

[21:36:32] anastasia270683: Step 1. Sales 100 x 60%= 60, cos is given 48, profit 12. Step 2 is given 60%. Step 3 Balance sheet figure Cost incurred 48 + profit 12 - billings outstanding 8(58-50)= Creditor 52

[21:36:59] priti: step 1>>>100,000-48000-32000=20000

[21:38:01] anastasia270683: sorry i missed to mension that in step 1 i calculated overall profit of 20,000 as pritti said

[21:38:19] gaboosm: me too

[21:38:32] Salman: Revenue (60% × 100)

Expenses (60% × 80) (48,000)

60,000 so Profit



[21:38:56] Salman: same as Priti

12,000

[21:38:57] paula13: yep!



30


[21:39:05] Salman: 60% multiplied by 20

[21:39:14] mohdqaq: 12000

[21:39:26] Salman: these are our Income statement figurs

[21:39:30] Salman: Sales

[21:39:34] Salman: Expenses

[21:39:38] mohdqaq: 60000

[21:39:39] Salman: that is Cost

[21:39:41] Salman: and Profit



[21:39:49] Salman: Balance Sheet items

[21:40:42] Salman: Contract costs incurred to date

Recognised profits

Less: progress billings to date (58,000)

12,000

48,000

Cost due FROM customers 2,000


[21:41:01] paula13: yep

[21:41:14] priti: ?what about the progress billings we have already recieved

[21:41:18] anastasia270683: no where does 2 come from

[21:41:35] Salman: {anastasia270683} we add conctract cost to profit

[21:41:37] anastasia270683: or yeah i got is but i join priti's qstn

[21:41:41] Salman: and subtract the progress billings

[21:41:48] Salman: first we calculate

[21:41:55] Salman: that how much cost did we incurred

[21:42:01] Salman: that is how much does customer owe us

[21:42:12] anastasia270683: but hes given us 50

[21:42:15] Salman: then he already paid us progress billings

[21:42:20] Salman: so we deduct them

[21:42:21] Salman: NO

[21:42:30] Salman: LOOK

[21:42:36] Salman: that is just to check US

[21:42:42] Salman: that we know all the BALANCE SHEET ITEMS

[21:42:43] Salman: or NOT

[21:42:50] Salman: PROGRESS BILLINGS

[21:42:52] Salman: are something

[21:42:55] Salman: Customer has paid



31


[21:42:58] Salman: right?

[21:42:59] Salman: agree?

[21:43:03] priti: right

[21:43:16] Salman: so we deduce the total progress billings

[21:43:21] Salman: what he has wrote there

[21:43:22] Salman: is that

[21:43:26] Salman: we received 50000

[21:43:34] Salman: but has not received the 8000 yet

[21:43:38] Salman: SO

[21:43:43] Salman: they are receivables

[21:43:45] Salman: OK?

[21:43:51] davisdadon: yup

[21:43:53] davisdadon: clear

[21:44:00] Salman: PROGRESS BILLINGS is TOTALLY DEDUCTED


[21:44:07] sichom02: ok

[21:44:09] priti: ok

[21:44:10] anastasia270683: yeah suppose :)


[21:44:17] Salman: I just had some tablets, this headache is killing me

[21:44:17] starsonhigh: ok

[21:44:22] Salman: please start question 2

[21:44:24] Salman: :(

[21:44:30] davisdadon: cool

[21:44:31] anastasia270683: ok

[21:44:48] starsonhigh: hush

[21:46:03] priti: step 1 >>>>>>100-72-48 = 20 loss

[21:46:47] anastasia270683: 20 loss and 6 in accs [payable in SFP

[21:47:24] mohdqaq: Ravenue 100 * 60%

Cost 72000

60000

Loss (12000)

[21:48:08] paula13: 20,000 loss sales 52,000 due to customer 58000-52000 = 6000

[21:48:14] chrismar112003: 20 loss, 6 owed to customers

[21:48:23] mohdqaq: 100000 - 120000 = -20000 x 60 % = -12000

[21:48:24] davisdadon: Expected outcome -20 =, % of profit "not needed", recognise total loss -20

[21:48:30] davisdadon: receivables 8



32


[21:48:59] gaboosm: 20 loss and 6 payables in sfp

[21:49:01] anastasia270683: Becaus overall project works out as a loss 20, to work out sales we take loss 20 + cos

120x60% = 20+72= sales 92

[21:49:01] davisdadon: {chrismar112003} how can you owe a customer??? the owe you

[21:49:08] paula13: {davisdadon} its a loss, we skip this step ...

[21:49:24] davisdadon: {paula13} hence i put "not needed"

[21:49:34] chrismar112003: 6 payables 8 receivables

[21:49:42] mohdqaq: 2000 is recaivable

[21:49:48] paula13: {davisdadon} sorry that was to mohdqaq

[21:50:09] Salman: Paula

[21:50:10] mohdqaq: 72000 - 12000 - 58000 = 2000

[21:50:12] Salman: we skip this step

[21:50:15] Salman: but u can use it ;)

[21:50:22] Salman: to calculate the Sale figure

[21:50:22] anastasia270683: {davisdadon} {chrismar112003} its just something we need to recognise if SFP according to standards

[21:50:27] Salman: and the Cost figure

[21:50:44] mohdqaq: 60000

[21:50:44] paula13: {Salman} ok

[21:51:38] mohdqaq: {Salman} am I right plz tell?

[21:51:50] Salman: telling telling :P

[21:51:53] Salman: let me solve

[21:51:54] Salman: :P

[21:51:56] sichom02: i am lost but its ok i will go thru the history later. anastasia, help?

[21:52:10] paula13: {Salman} why would u need it to calculate sales figure?

[21:52:26] Salman: the step 2

[21:52:27] anastasia270683: {sichom02} if my answer agrees to salmon i can explain it to you after session

[21:52:28] sichom02: ok salman i am following u. lets go

[21:52:31] Salman: u can use the percentage

[21:52:32] Salman: too

[21:52:33] paula13: sales would be 72,000 - 20000 = 52, 000 aint that right?

[21:52:39] Salman: the percentage is 60%

[21:52:50] Salman: and price 100

[21:52:54] Salman: so the sale is 60%

[21:52:58] Salman: that is 60000

[21:52:59] Salman: ok?



33



[21:53:07] Salman: and the total cost is 72 plus 48

[21:53:10] Salman: i.e 120000

[21:53:13] sichom02: ok i had got taht

[21:53:18] Salman: so 60% of that

[21:53:27] Salman: will be like 72000

[21:53:40] Salman: we have the Loss of 20


[21:53:45] Salman: to be wholly accrued

[21:53:51] Salman: we can use these three

[21:54:01] Salman: to calculate Expected Loss figure

[21:54:13] mohdqaq: 20000

[21:54:40] sichom02: wait


[21:54:48] sichom02: hw 20000

[21:55:12] Salman: cuz we calculated 20,000 in the start

[21:55:14] Salman: LOSS

[21:55:20] Salman: so we recognize it right away

[21:55:34] davisdadon: {sichom02} i vaguely remember a dumness statement and being ahead comment

[21:55:42] sichom02: :no:

[21:55:51] Salman: say it then...

[21:55:52] Salman: what?

[21:55:58] sichom02: {davisdadon} behave and cocetrate

[21:55:59] Salman: 72000 and 48000 are the costs

[21:56:12] Salman: and the 100000 is the contract price

[21:56:14] Salman: so

[21:56:24] sichom02: ooooh

[21:56:26] Salman: 100,000 - 72,000 - 48,000

[21:56:30] Salman: = 20,000

[21:56:35] Salman: total loss recognized...

[21:56:38] sichom02: =20000 loss

[21:57:10] davisdadon: covered

[21:57:23] sichom02: lets roll

[21:57:37] Salman: Revenue (100 × 60%)

Expenses (120 × 60%) (72,000)

60,000

Expected loss (bal item) (8,000)



34

For latest course notes updates, free audio and video lectures and Support please visit www.opentuition.com so Recognised loss (20,000)

[21:57:55] Salman: these are income statement figures

[21:58:00] Salman: now balance sheet figures

[21:58:09] sichom02: ok

[21:58:28] anastasia270683: doesnt 92 go as a sales figure in IS?

[21:58:29] Salman: Contract costs incurred to date

Recognised losses

72,000

(20,000)

Less: progress billings to date (58,000)

Gross amounts due to customers (6,000)

[21:58:39] Salman: {anastasia270683} what is 92? :S

[21:59:03] anastasia270683: because a loss is 20 and cos is 72, than sales should be 92

[21:59:14] Salman: NO

[21:59:20] anastasia270683: sales should be 52

[21:59:26] Salman: ah

[21:59:34] mohdqaq: plz exlain Expected loss

[21:59:40] Salman: look up there...

[21:59:43] sichom02: oiu

[22:00:30] davisdadon: i am clear up to the point of where im seeing 6000

[22:00:36] chrismar112003: What about the 8000 difference of progress due and received.

[22:00:40] davisdadon: why do we have to pay the customer 6

[22:00:46] anastasia270683: Salman: Revenue (100 × 60%)

Expenses (120 × 60%) (72,000)

60,000

Expected loss (bal item) (8,000) so Recognised loss (20,000)Salman: these are income statement figures

[22:00:55] anastasia270683: i don't understand this.

[22:00:58] paula13: {Salman} i agree with anastasia - sales should be 52 (72-20)

[22:01:12] Salman: ah

[22:01:15] Salman: alright

[22:01:23] Salman: I somehow agree with u too :S

[22:01:29] Salman: cuz I learned it that way

[22:01:36] Salman: the answer to that question

[22:01:38] anastasia270683: ahh see your headache has taken over you

[22:01:39] Salman: where I got it from

[22:01:41] Salman: said that

[22:01:42] Salman: :S

[22:01:47] Salman: but I think forget about that



35


[22:01:50] Salman: Do as we were doing

[22:01:57] davisdadon: you mean me?

[22:02:03] Salman: 52 as Anastasia says

[22:02:09] Salman: {davisdadon} not you

[22:02:17] Salman: {davisdadon} your question about 6000

[22:02:18] anastasia270683: you were just checking us, weren't you Salman?

[22:02:29] sichom02: wat ws ur sales figure salman

[22:02:41] Salman: is that the contract cost incurred was above than the contract price

[22:02:49] Salman: so we just say it like this

[22:02:53] Salman: Cost due TO

[22:03:09] Salman: as in a liability


[22:03:30] Salman: davisdadon

[22:03:36] Salman: its like

[22:03:45] Salman: the progress billings

[22:03:52] Salman: exceeds the costs incurred

[22:04:08] Salman: plus the recognised profites or / less recognized losses

[22:04:12] Salman: so indirectly

[22:04:16] Salman: customer payed us more



[22:04:25] Salman: so now we have to give it back


[22:04:33] Salman: I dint do it :(

[22:04:45] Salman: I was just checking ur answers with the one in the resource

[22:04:53] Salman: the headache is not even letting me read this chat

[22:05:07] Salman: we will go with the 52 figure of anastasia

[22:05:10] Salman: I agree with that

[22:05:11] Salman: ok?

[22:05:20] anastasia270683: yep

[22:05:24] Salman: somehow we will make it more clear

[22:05:28] Salman: in later questions too

[22:05:31] Salman: past papers etc

[22:05:35] Salman: for now

[22:05:40] Salman: do Q 3 urself

[22:05:46] mohammedtj: @Give her the chicken b4 we proceed



36


[22:05:52] Salman: the answers are uploaded

[22:06:08] Salman: {mohammedtj} she is new here

[22:06:10] anastasia270683: i wouldn't mind a chicken

[22:06:10] paula13: {Salman} yeah, so we should work out the sales figure from the calculation: cost +/- profit/loss, not from % of completion x price?

[22:06:15] Salman: she need to participate more :P

[22:06:22] Salman: {paula13} yesh

[22:06:31] anastasia270683: dont you give chickens to newbies?

[22:06:37] paula13: {Salman} is that a general rule?

[22:06:39] Salman: nope :P

[22:06:42] Salman: {paula13} nah

[22:06:47] Salman: u can deviate from rules

[22:06:52] Salman: {paula13} it depend on the questions

[22:07:09] Salman: the question itself give us how to calculate expected outcome

[22:07:12] Salman: or the percentage

[22:07:12] anastasia270683: {paula13} thats if theres an overall loss calculated in step 1

[22:07:53] paula13: {anastasia270683} so if its loss, we calculate it this way, if its profit we calculate by % ?

[22:08:14] davisdadon: {paula13} %s can work either way

[22:08:27] paula13: {davisdadon} it didnt work here ...

[22:08:35] mohdqaq: ok Salman AH

[22:08:41] mohdqaq: bye all

[22:08:46] anastasia270683: as i understand we only calculate a sales figure by COS less loss only becuase theres a loss and it needs to be recognised straight away,



37

For latest course notes updates, free audio and video lectures and

Related documents

Products

Support

For latest course notes updates, free audio and video lectures and

Related documents

Add this document to collection(s)

Add this document to saved

Suggest us how to improve StudyLib