Contract with progress billings and an advance
On Jan 01, 01, entity E concludes a fixed price contract. Total contract revenue is CU 120. The total contract costs of CU 90 will be incurred in thirds in each of the years 01–03. At the end of 01, E bills an amount of CU 35 to its customer, which is paid on Jan 15, 02. In 02, an amount of CU 45 is billed to the customer, which is paid promptly. Moreover, on Dec 31, 02, the customer pays an advance of CU 20 for work, which is performed in 03. The billing for the remaining amount of CU 20 that is still outstanding on Dec 31, 03 is effected at the beginning of 04.
Required
Prepare any necessary entries in E”s financial statements as at Dec 31 for the years 01–03. The stage of completion is determined according to the cost-to-cost method (IAS 11.30a). E prepares its separate income statement in accordance with the function of expense method (= cost of sales method).
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