Suntex entered into a contract to build a 10-storey building at Kajang in 2018 with a...

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Suntex entered into a contract to build a 10-storey building at Kajang in 2018 with a contract price of RM24 million. However, due to acceleration of cost of building material, there is a 10% increase in variation to the contract price from 2019 onwards. This increase in the contract price is allowable under the terms and conditions of the contract. The project began in the 2018 and expected to complete in 2020. It is Suntex's accounting policy to recognise profit based on cost incurred to total estimated cost. The following table shows the position of the contract at the end of the year 2018, 2019 and 2020: 2018 2019 2020 RM'000 RM'000 RM'000 Cumulative cost incurred to date 7.560 14,400 24,800 Estimated cost to complete 17.240 9.600 NIL Progress billings for the year Cash collected as % of progress billing for the year 6.400 8,800 8,800 50% 60% 70% Required: (a) Prepare extracts of statements of profit and loss of Suntex, showing complete calculation of revenues recognised, costs recognised and profits/(loss) for 2018, 2019 and 2020. (8 marks) (b) Prepare extracts of statements of financial position of Suntax, showing the contract asset or contract liability, and accounts receivable for 2018, 2019 and 2020. (8 marks) (c) Outline the difference between fixed price contract and cost-plus contract. (4 marks) Suntex entered into a contract to build a 10-storey building at Kajang in 2018 with a contract price of RM24 million. However, due to acceleration of cost of building material, there is a 10% increase in variation to the contract price from 2019 onwards. This increase in the contract price is allowable under the terms and conditions of the contract. The project began in the 2018 and expected to complete in 2020. It is Suntex's accounting policy to recognise profit based on cost incurred to total estimated cost. The following table shows the position of the contract at the end of the year 2018, 2019 and 2020: 2018 2019 2020 RM'000 RM'000 RM'000 Cumulative cost incurred to date 7.560 14,400 24,800 Estimated cost to complete 17.240 9.600 NIL Progress billings for the year Cash collected as % of progress billing for the year 6.400 8,800 8,800 50% 60% 70% Required: (a) Prepare extracts of statements of profit and loss of Suntex, showing complete calculation of revenues recognised, costs recognised and profits/(loss) for 2018, 2019 and 2020. (8 marks) (b) Prepare extracts of statements of financial position of Suntax, showing the contract asset or contract liability, and accounts receivable for 2018, 2019 and 2020. (8 marks) (c) Outline the difference between fixed price contract and cost-plus contract. (4 marks)