During the course of examining the draft accounts of BRIGADE plc for the year ended 31 December 200X, you have noted the following matter:

At 31 December 200X, the company was engaged in a long-term contract with CONTOUR Limited which had commenced in February 200X, and was expected to take a further two years to complete. The following data was used at 31 December 200X, in order to prepare the draft accounts in accordance with IAS 11 Construction Contracts.

Profits are taken to arise evenly over the life of the contract which, at 31 December 200X, was estimated to be 45% complete.
On 1 April 200Y, due to technical difficulties, it was found that the estimated further costs to complete the contract had increased by which existed at 31 December 200X an additional €500,000. None of these additional costs can be passed on to the customer or claimed from any third party.
Requirement Set out in journal form (narratives are not required) any adjustments to the draft accounts which are required as a result of the additional costs of completing the CONTOUR Limited contract. =

Transcribed Image Text:

Fixed contract price Total costs incurred to date Estimated further costs to completion Progress payments received to date '000 3,000 1,420 1,350 1,200