Question:
Refer to the situation described in BE 5–9. How much revenue, cost, and gross profit will the company
recognize in the first and second year of the contract applying the cost recovery method that is required
by IFRS?
Answer:
Year 1:
Revenue: $6 million
Cost: $6 million
Gross profit: $0
Year 2:
Revenue: $14 million ($20 million total – 6 million in year 1)
Cost: $10 million
Gross profit: $ 4 million
Refer to the situation described in BE 5–9. How much revenue, cost, and gross profit will the company
recognize in the first and second year of the contract applying the cost recovery method that is required
by IFRS?
Answer:
Year 1:
Revenue: $6 million
Cost: $6 million
Gross profit: $0
Year 2:
Revenue: $14 million ($20 million total – 6 million in year 1)
Cost: $10 million
Gross profit: $ 4 million
