Reference no: EM132966810

Question - 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

Total - $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

TOTAL - $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

TOTAL - $46,000,000

Required -

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

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

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