Reference no: EM132617737

Question - Frontier Technology Ltd (FTL), a satellite manufacturer, entered into a contract on 10 January 2019 with Total Defence Agency (TDA) to build a satellite for a total consideration of $4,000,000.

Under the contract, FTL is to do the following tasks:

(1) engineer and design the satellite according to the agency's specifications and other contract requirements to assure proper operation;

(2) construct the satellite to the exacting standards and specifications required;

(3) launch the satellite.

FTL began the construction on 1 February 2019 and estimated a total of 2 years to finish constructing and launching the satellite.

FTL will progressively bill TDA for work done based on the estimated percentage-of-completion.

To date, it is estimated that 25% of the work has been completed.

Required -

a) With reference to FRS 115, identify the performance obligation(s) in the contract between FTL and TDA. Explain your answer. You may refer to the respective tasks by their numbers, ie Task (1), Task (2) etc.

b) Is / (Are) the performance obligation(s) identified in (a) above satisfied at a point in time or over time? Explain your answer.

c) Determine when and how the revenue of $4,000,000 is to be recognized in the books of FTL.

d) Suggest one method that FTL may use to estimate the percentage of completion of work done.