- 15 Marks
FR – L2 – Q15 – Financial Reporting Standards
Calculate revenue, costs, and financial statement balances for four construction contracts using cost proportion method.
Question
On 31 March 20X9, Annabel Ltd had four construction contracts in progress. Details are set out below.
| Contract A | Contract B | Contract C | Contract D | |
|---|---|---|---|---|
| GH¢000 | GH¢000 | GH¢000 | GH¢000 | |
| Contract price | 1,850 | 750 | 960 | 800 |
| Costs to date | 1,490 | 590 | 405 | 120 |
| Estimated future costs | 25 | 600 | 480 | |
| Revenue taken in earlier years | 990 | 100 | ||
| Cost of sales recognised in earlier years | 800 | 100 | ||
| Progress billings to date | 1,850 | 690 | 650 | 100 |
| Cash received to date | 1,850 | 600 | 600 | 100 |
Contract A was completed during the year.
Contract C commenced on 1 May 20X8.
Contract D commenced on 1 January 20X9. It is not considered possible on 31 March 20X9 to assess the outcome of Contract D with any certainty.
Annabel Ltd recognises revenue based on the proportion of costs incurred to date to expected total costs.
Required:
Show the amounts that would be recognised and presented for each contract in the financial statements of Annabel Ltd for the year ended 31 March 20X9 and show the total balances in those financial statements. Work to the nearest GH¢000.
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