At the beginning of fiscal year $2021,$ BAR plc entered into a contract with VAL plc to build a ship and to subsequently provide an annual maintenance service for the ship over a period of five years. The contract includes a fixed price for both the construction of the ship and the provision of the maintenance service of $120$ million. VAL plc re$-$quested that the ship has specific features and BAR plc agreed to customise the ship. However, BAR plc considered it unnecessary to customise the maintenance service, since the maintenance service is regularly provided for different types of ships, including ships not built by BAR plc$.$ BAR plc classifies the construction of the ship and the provision of the annual maintenance service as two separate performance obligations. BAR plc started with the construction of the ship in fiscal year $2021$ and expects its completion in fiscal year $2023.$ Below are the details to account for the construction of the ship at the end of fiscal year $2021$:

$($in million$)$

Transaction price for the construction of the ship $95$

Costs incurred to date

for work performed in $202143\mathrm{.}7$

for materials to be used in later years $6\mathrm{.}8$

Other costs expected in later years $27\mathrm{.}3$

Amounts invoiced to VAL plc in $202130$

Amounts received from VAL plc in $202112\mathrm{.}5$

REQUIRED:

i$)$ BAR plc classifies the construction of the ship and the provision of the maintenance service as two separate performance obligations. Explain why this classification appears correct.

ii$)$ Show how the construction of the ship should be treated in BAR plc$$s financial statements for fiscal year $2021.$ Calculate the relevant amounts, prepare the jour$-$nal entries and explain your steps.

iii$)$ Assume that, in fiscal year $2022,$ BAR plc increases its estimate of total expected costs for the construction of the ship by an amount of $20$ million. Calculate the resulting loss from the construction of the ship and specify in which fiscal year BAR plc has to recognise this loss in its financial statements.

iv$)$ Calculate the revenue attributable to the provision of the annual maintenance ser$-$vice and explain how BAR plc should recognise this revenue. You can, but do not have to$,$ prepare journal entries.