In 2016 Contractor enters into a contract with Government to build an aircraft carrier for a fixed price of €4 billion. The contract contains a single performance obligation that is satisfied over time. Additional contract characteristics are:
$\bullet$Total estimated contract costs are €3.6 billion, excluding costs related to wasted labour and materials.
$\bullet$Costs incurred in year one are €740m, including €20m of wasted labour and materials.
Contractor concludes that the performance obligation is satisfied over time, because Government controls the aircraft carrier as it is created. Contractor also concludes that an input method using costs incurred relative to total cost expected to be incurred is an appropriate measure of progress towards satisfying the performance obligation.
How much revenue and cost should Contractor recognise as of the end of 2016?
$\quad$Revenue$\quad$Cost
A)$\quad$€ 800m$\quad$€ 740m
B)$\quad$€ 800m$\quad$ € 760m
C)$\quad$€ 800m$\quad$ € 720 m
D)$\quad$€ 760m$\quad$ € 740m

Question

In 2016 Contractor enters into a contract with Government to build an aircraft carrier for a fixed price of €4 billion. The contract contains a single performance obligation that is satisfied over time. Additional contract characteristics are:
$\bullet$Total estimated contract costs are €3.6 billion, excluding costs related to wasted labour and materials.
$\bullet$Costs incurred in year one are €740m, including €20m of wasted labour and materials.
Contractor concludes that the performance obligation is satisfied over time, because Government controls the aircraft carrier as it is created. Contractor also concludes that an input method using costs incurred relative to total cost expected to be incurred is an appropriate measure of progress towards satisfying the performance obligation.
How much revenue and cost should Contractor recognise as of the end of 2016?
$\quad$Revenue$\quad$Cost 
A)$\quad$€ 800m$\quad$€ 740m
B)$\quad$€ 800m$\quad$ € 760m
C)$\quad$€ 800m$\quad$ € 720 m
D)$\quad$€ 760m$\quad$ € 740m

Quizplus · Accepted Answer

The Answer of In 2016 Contractor enters into a contract with Government to build an aircraft carrier for a fixed price of €4 billion. The contract contains a single performance obligation that is satisfied over time. Additional contract characteristics are:
$\bullet$Total estimated contract costs are €3.6 billion, excluding costs related to wasted labour and materials.
$\bullet$Costs incurred in year one are €740m, including €20m of wasted labour and materials.
Contractor concludes that the performance obligation is satisfied over time, because Government controls the aircraft carrier as it is created. Contractor also concludes that an input method using costs incurred relative to total cost expected to be incurred is an appropriate measure of progress towards satisfying the performance obligation.
How much revenue and cost should Contractor recognise as of the end of 2016?
$\quad$Revenue$\quad$Cost 
A)$\quad$€ 800m$\quad$€ 740m
B)$\quad$€ 800m$\quad$ € 760m
C)$\quad$€ 800m$\quad$ € 720 m
D)$\quad$€ 760m$\quad$ € 740m

In 2016 Contractor Enters into a Contract with Government to Build