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XYZ Ltd signs a contract on 30 June 2015, agreeing to build a bridge for...

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Accounting

XYZ Ltd signs a contract on 30 June 2015, agreeing to build a bridge for ABC Limited at a contract price of $40 million. XYZ Ltd estimates that construction costs will be as follows:

___________________________________________________

Year Ending Cost

___________________________________________________

30 June 2016 $10 000 000

30 June 2017 $16 000 000

30 June 2018 $ 6 000 000

$32 000 000

The contract provides that ABC will make payments on 30 June of each year as follows:

2016 $8 000 000

2017 $20 000 000

2018 $12 000 000

$40 000 000

XYZ now estimates at the beginning of the 2017 financial year that construction costs will be as follows:

_________________________________________________

Year Ending Cost

___________________________________________________

30 June 2016 $10 000 000

30 June 2017 $21 000 000

30 June 2018 $15 000 000

$46 000 000

Required:

Calculate:

a) Percentage of completion for each of the three years.

b) Revenue to be recognised in each of the three years.

c) Gross profit/loss to be recognised in each of the three years.

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