Discuss stage of completion cannot be reliably assessed

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1. Sun City Limited commences construction of a multi-purpose water park on 1 July 2014 for Pretoria Limited. Sun City Limited signs a fixed-price contract for total revenues of $50 million. The project is expected to be completed by the end of 2017 and Pretoria Limited controls the asset throughout the period of construction. The expected cost as at the commencement of construction is $38 million. The estimated costs of a construction project might change throughout the project-in this example, they do change. The following data relates to the project (the financial years end on 30 June):

 

2015 ($m)

2016 ($m)

2017($m)

Costs for the year

10

18

12

Costs incurred to date

10

28

40

Estimated costs to complete

28

12

-

Progress billings during the year

12

20

18

Cash collected during the year

11

19

20

Required

(a) Using the above data, compute the gross profit to be recognised for each of the three years, assuming that the outcome of the contract can be reliably estimated. LO 15.10

(b) Prepare the journal entries for the 2015 financial year using the percentage-of-completion method.

(c) Prepare the journal entries for the 2015 financial year, assuming the stage of completion cannot be reliably assessed.

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The solution is answered in question answer manner.There are around 4 questions which are answers completely.Questions related to computation of revaluation of assets, debenture price valuation, impairment of goodwill using correct technique and so on.

Reference no: EM131766384

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