Question $3$

$50$ marks

Progress Construction Ltd$.$ is undertaking a long$-$term construction project expected to

last $3$ years. The total contract value is R$10$ million. By the end of the first year, the

company has incurred costs of R$3$ million and has completed $40\%$ of the work. The

company uses the percentage of completion method for recognizing revenue.

a$)$ Calculate the revenue to be recognized at the end of the first year. $(15)$

b$)$ Determine the profit to be recognized for the first year. $(15)$

c$)$ Discuss the advantages of the percentage of completion method over the

completed contract method. $(10)$

d$)$ How would the recognition of revenue differ if the project was only $25\%$ complete at

the end of the first year? $(10)$