Problem 4 (28 points): Alfred Limited (Alfred) is working on a 4-year construction contract (e.g., 2014-2018) started on January 1, 2014 for Ashley Corporation for a total contract price of $1,050,000. Alfred uses the percentage of completion in accounting for the contract. Information relating this contract is as follows: 2014 2015 2016 2017 $'000 $'000 $'000 $'000 Costs incurred during the year 288 258 357 227 Estimated costs to complete as 612 429 172 of year-end Accumulated Billings (i.e., 555 759 cumulative Billings up to date) 1,050 Accounts Receivable as of year-end 269 127 143 109 (with reference to this contract with Ashley only) 298 Note: There is no bad debt relating to the Accounts Receivable with reference to this contract with Ashley. Collection of payment from Ashley is according to the payment schedule, and there is no delay of payment. (a) Prepare all the necessary journal entries for Alfred for year 2015, 2016 and 2017 (Don't write journal entries for 2014). Show your working to get credit. Use the following journal format to save time. Note: Year 2014 journal entries are not necessary (14 points) Necessary (14 POILS 2015 ($'000) 2016 ($'000) Dr Cr | Dr Cr 2017 ($'000) Dr Cr Account (b) Prepare relevant income statement and balance sheet section for 2016 (6 points). (c) Alfred is currently using the Percentage of Completion method, and is considering using the Cost-Recovery method. What will the difference in the gross profit when compared to Percentage-of-Completion method in 2015 and 2016? (Note: Only the Final numbers are required and graded.) (4 points) 2015 2016 Difference Difference (S'000) ($'000) Gross Profit (d) Now assume that the estimated costs to complete as of year-end of 2015 and 2016 increase by 20% EACH YEAR with all other items remain unchanged. What is the difference in the gross profit when compared to the original estimated costs for year 2015 and 2016 if Alfred uses the percentage of completion method? (Note: Only the Final numbers are required and graded) (4 points) 2015 Difference ($'000) 2016 Difference ($'000) Gross Profit Problem 4 (28 points): Alfred Limited (Alfred) is working on a 4-year construction contract (e.g., 2014-2018) started on January 1, 2014 for Ashley Corporation for a total contract price of $1,050,000. Alfred uses the percentage of completion in accounting for the contract. Information relating this contract is as follows: 2014 2015 2016 2017 $'000 $'000 $'000 $'000 Costs incurred during the year 288 258 357 227 Estimated costs to complete as 612 429 172 of year-end Accumulated Billings (i.e., 555 759 cumulative Billings up to date) 1,050 Accounts Receivable as of year-end 269 127 143 109 (with reference to this contract with Ashley only) 298 Note: There is no bad debt relating to the Accounts Receivable with reference to this contract with Ashley. Collection of payment from Ashley is according to the payment schedule, and there is no delay of payment. (a) Prepare all the necessary journal entries for Alfred for year 2015, 2016 and 2017 (Don't write journal entries for 2014). Show your working to get credit. Use the following journal format to save time. Note: Year 2014 journal entries are not necessary (14 points) Necessary (14 POILS 2015 ($'000) 2016 ($'000) Dr Cr | Dr Cr 2017 ($'000) Dr Cr Account (b) Prepare relevant income statement and balance sheet section for 2016 (6 points). (c) Alfred is currently using the Percentage of Completion method, and is considering using the Cost-Recovery method. What will the difference in the gross profit when compared to Percentage-of-Completion method in 2015 and 2016? (Note: Only the Final numbers are required and graded.) (4 points) 2015 2016 Difference Difference (S'000) ($'000) Gross Profit (d) Now assume that the estimated costs to complete as of year-end of 2015 and 2016 increase by 20% EACH YEAR with all other items remain unchanged. What is the difference in the gross profit when compared to the original estimated costs for year 2015 and 2016 if Alfred uses the percentage of completion method? (Note: Only the Final numbers are required and graded) (4 points) 2015 Difference ($'000) 2016 Difference ($'000) Gross Profit