Question

CORRECT ANSWER NEEDED ASAP! THANK YOU

During 20x5, the Ibti Construction Company obtained a $15 million contract to build a bridge. The costs incurred, estimated costs to complete and the billings made on the contract for the period 20x5 – 20x6 are as follows: 20x5 20x6 $3,000,000 $5,000,000 Costs incurred during the year Expected costs to complete Billings 9,000,000 6,000,000 7,500,000 Ibti uses the percentage of completion method. Costs incurred relative to total project costs are used to measure the percentage of completion at the end of the year. Required For each of the years 20x5 and 20x6, calculate the following: revenues realized, costs realized, profit or loss realized, and the amount recognized for the project on Ibti's Statement of Financial Position at the end of each year.

Answer 1

Particulars	2015	2016
a) Revenue to be recorded in Statement of Profit and Loss (WN-3)	3,750,000	4,821,429
b) Cost to be recorded in Statement of Profit and Loss (WN-2 and 2.1)	3,000,000	5,000,000
c) Profit/(Loss) to be recorded in Statement of Profit and Loss (WN-4)	750,000	-178,571
d) Amount Recognised for the project on Financial Statement Position
Unearned Revenue (shown under Liability side of Balance Sheet)	3,750,000
Unbilled Revenue (shown under asset side of Balance Sheet)		1,071,429
WN-1
Particulars	2015	2016
Contract Revenue	15,000,000	15,000,000
Total Contract Cost (WN-2 and 2.1)	12,000,000	14,000,000
Estimated Profit	3,000,000	1,000,000
WN-2
Calculation of Percentage of Completion for 2015
Particulars	2015
Costs Incurred (A)	3,000,000
Expected cost to complete (B)	9,000,000
Total Contract Cost (C = A+B)	12,000,000
Percentage of Completion	25%
Percentage of Completion = Costs Incurred / Total Contract Cost *100
WN-2.1
Calculation of Percentage of Completion for 2016
Particulars	2016
Costs Incurred (A) ( 2015+2016)	8,000,000
Expected cost to complete (B)	6,000,000
Total Contract Cost (C = A+B)	14,000,000
Percentage of Completion	57%
WN-3
Calculation of Revenue to be recored in Statement of Profit & Loss
Particulars	2015	2016
Contract Revenue	15,000,000	15,000,000
% of Completion	25%	57%
Cumulative Revenue to be recored in Statement of Profit & Loss (Contract Revenue* % of Completion)	3,750,000	8,571,429
Revenue Recorded in Previous Year	-	3,750,000
Revenue to be Recorded in current Year	3,750,000	4,821,429
WN-4
Calculation of Profit/Loss to be recored in Statement of Profit & Loss	A	B	C =B-A
	Cumulative	Cumulative	For the year
Particulars	2015	2016	2016
Revenue to be recored in Statement of Profit & Loss	3,750,000	8,571,429	4,821,429
Less : Costs Incurred	-3,000,000	-8,000,000	-5,000,000
Profit/Loss to be recored in Statement of Profit & Loss	750,000	571,429	-178,571
WN-5
Calculation of Unearned Revenue or Unbilled Revenue
Particulars	2015	2016
Opening (Unearned Revenue)/ Unbilled Revenue		-3,750,000
Revenue to be recorded from % of completion	3,750,000	4,821,429
Less : Billings	-7,500,000	0
Closing (Unearned Revenue)/ Unbilled Revenue	-3,750,000	1,071,429