In the Case of a Fixed Price Contract,AASB 111 Specifies

question 39

Multiple Choice

In the case of a fixed price contract,AASB 111 specifies four conditions that must all be met in order for the percentage-of-completion method to be applied.These conditions include:

• A) Costs related to the contract can be clearly identified and measured reliably.
• B) It is probable that the economic benefits arising from the contract will flow to the contractor.
• C) The entity commissioning the work has a good credit rating and is able to pay its debts.
• D) Costs related to the contract can be clearly identified and measured reliably and it is probable that the economic benefits arising from the contract will flow to the contractor.

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Definitions:

Cash Collections

The process of gathering all cash receipts from sales or other sources during a particular period.

Merchandise Purchases Budget

A financial plan that estimates the cost of goods a company needs to purchase to meet its sales goals.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period of time, primarily used to assess whether a company has sufficient cash to fulfill its operations and financial commitments.

Manufacturing Overhead Budget

A detailed plan that estimates the expected manufacturing overhead costs for a specific period, assisting in financial planning.