Assume the same facts as in Challenging Question 28, except that XYZ now estimates at the beginning of the 2025 financial year that construction costs will be as follows:

Provide the journal entries for each year, assuming that cost (an input measure) is used as the basis for assessing progress on the construction contract.

Data from Challenging Question 28

XYZ signs a contract on 30 June 2023, agreeing to build a bridge for ABC at a contract price of $40 million. ABC will be in control of the asset throughout the construction process. XYZ estimates that construction costs will be as follows:

The contract is completed as expected on 30 June 2026. Assume that actual costs and cash collections coincide with expectations and that cost (an input measure) is used as the basis for assessing progress on the construction contract.

REQUIRED

a. Calculate the income recognised each year.

b. Provide the journal entries for each year, assuming extent of completion on the construction contract cannot be reliably estimated.

c. Provide the journal entries for each year, assuming that the extent of completion on the construction contract can be reliably estimated.

Transcribed Image Text:

Year ending Cost 30 June 2024 $10000000 30 June 2025 $21000000 30 June 2026 $15000000 $46000000