ACCOUNTING FOR CONSTRUCTION CONTRACTS

ASSIGNMENT

On 31 December 2009 Hawkflight Construction had the following uncompleted long term contracts. All of the contracts commenced during the year.

Contract A B C TOTAL

$ $ $ $

Contact price 100 000 70 000 130 000 300 000

Estimated total costs 80 000 60 000 110 000 250 000

Cost to date

Material purchased 20 000 20 000 30 000 70 000

Wages 11 000 9 000 15 000 35 000

Electricity 2 150 3 200 4 550 9 900

Hire equipment 15 000

Design and technical assistance 20 000

General administration cost 15 000

Finance costs 10 000

Insurance 10 000

Subcontractors 30 000 10 000 20 000 60 000

244 900

Additional information

Hawkflight construction utilizes the percentage of completion method to determine profit on construction contracts. The percentage of completion is determined by referring to the proportion that contract costs incurred to date bear to the estimated total contract costs.

Included in the material purchased are the following amounts which were shown as inventories on hand at year end:

$

Contract A 2 000

Contract B 5 000

Contract C 5 000

The hired equipment was used as follows on the following contracts:

Contract A 35%

Contract C 65%

Design and technical assistance as well as insurance must be allowed between the different contracts on the basis of estimated total costs.

Payments to subcontractors include the following prepayments:

Contract A $20 000

Contract C 5 000