Reference no: EM132613180

Question - ABC Ltd (ABC), a solar panel manufacturer, entered into a contract on 10 January 2019 with Environmental Agency (EA) to build a solar panel for a total consideration of $4,000,000.

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

(1) Engineer and design the solar panel according to the agency's specifications and other contract requirements to assure proper operation;

(2) Construct the solar panel to the exacting standards and specifications required;

(3) Launch the solar panel

ABC began the construction on 1 February 2019 and estimated a total of 2 years to finish constructing and launching the solar panel.

ABC will progressively bill EA 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 ABC and EA. Explain your answer.

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 ABC.

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