Alfa Ltd. enters into a 3 years contract, the costs and profit/loss details of which are:

Contract price $30 m
Estimated costs $21 m (when the contract was signed)
Estimated profit: $9 m
Details of the actual costs and estimated costs to complete the contract are:

Year ended 31 March

Year 1($000)
Year 2($000)
Year 3 ($000)

Construction costs in the year

2 940
16 635
12 000

Costs to date

2 940
19 575
31 575

Estimated costs to complete

18 060
12 000

Estimated total costs (costs to date + costs to complete)

21 000
31 575
31 575
Notes:
- At the end of year 1 the project is still profitable and profit can be recognized.
- At the end of year 2 the project’s total costs exceed the contract price. There will be an overall loss on the contract which must be recognized in year 2.

Required:
Prepare the general ledger for ‘construction in process/progress (CIP)’ account.

Answer rating: 100% (QA)

Solution General Ledger Construction in processprogress CIP Date Description Debit Credit Balance Ma... View the full answer