XYZ signs a contract on 30 June 2023, agreeing to build a bridge for ABC at a
Question:
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.
Step by Step Answer:
a b c Contract price less Estimated cost Costs to date Estimated costs to complete Estimated total ...View the full answer
