The Donovan Co. is nearing completion of a construction contract. The work has not gone to plan due to the issues outlined below: 1. The client requested a variation in the contract by requiring new security devices to be fitted, at an additional cost to Donovan of P1,00,000. The client has accepted reponsibilty for these additional costs even though they were not originally agreed. 2. Donovan has carried out additional work on the contract as there had been building errors. This cost P2,500,000 and the client refuses to accept responsibility. Which, if either, of the above issues should be included in contract revenue, according to IAS 11, Construction Contracts? a. Neither issue b. Issue (1) only c. Issue (2) only d. Both issue (1) and issue (2)
The Donovan Co. is nearing completion of a construction contract. The work has not gone to plan due to the issues outlined below: 1. The client requested a variation in the contract by requiring new security devices to be fitted, at an additional cost to Donovan of P1,00,000. The client has accepted reponsibilty for these additional costs even though they were not originally agreed. 2. Donovan has carried out additional work on the contract as there had been building errors. This cost P2,500,000 and the client refuses to accept responsibility. Which, if either, of the above issues should be included in contract revenue, according to IAS 11, Construction Contracts? a. Neither issue b. Issue (1) only c. Issue (2) only d. Both issue (1) and issue (2)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Donovan Co. is nearing completion of a construction contract. The work has not gone to plan due to the issues outlined below:
1. The client requested a variation in the contract by requiring new security devices to be fitted, at an additional cost to Donovan of P1,00,000. The client has accepted reponsibilty for these additional costs even though they were not originally agreed.
1. The client requested a variation in the contract by requiring new security devices to be fitted, at an additional cost to Donovan of P1,00,000. The client has accepted reponsibilty for these additional costs even though they were not originally agreed.
2. Donovan has carried out additional work on the contract as there had been building errors. This cost P2,500,000 and the client refuses to accept responsibility.
Which, if either, of the above issues should be included in contract revenue, according to IAS 11, Construction Contracts?
a. Neither issue
b. Issue (1) only
c. Issue (2) only
d. Both issue (1) and issue (2)
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