Question
Big Builders has a fixed contract price to build a shopping complex and the initial amount agreed was RM 300 million. This project is
Big Builders has a fixed contract price to build a shopping complex and the initial amount agreed was RM 300 million. This project is estimated to be completed in 3 years with construction activities' beginning in year 2019. At the commencement of the contract in 2019, the estimated contract cost to be completed was RM 210 million but at the end of 2019, the total estimated cost has increased to RM 290 million. In addition to that, material costs have increased by RM20 million due to unforeseen price escalation of imported materials. Big Builders has submitted a claim of RM20 million for this price escalation to its customer and negotiations are still in progress by the end of 2019. The contract does not provide for any price escalation clause. In 2020, the customer agreed on the variation, which increased the expected revenue from the contract by RM 50 million and incurred additional costs of RM 30 million. At the end of 2020 there were materials stored on site for use in the following period, which cost RM 2.5 million. The stage of completion was decided by calculating the proportional contract cost incurred for work to date bears to the latest estimated total contract costs. The contract costs incurred to date for the years were 2019: RM 50 million, 2020: RM 150 million (excluding materials in store), and 2021: RM 340 million (including material from store previously). Progress billing is RM 100 million each for the first 2 years and the final progress billing was RM 140 million. Cash received from customers was RM 98 million, RM 102 million and RM 120 million for the years 2019, 2020 and 2021, respectively. Required: Prepare Big Builder's extracts of the Statement of Profit or Loss and Statement of Financial Position for 2019, 2020 and 2021. (Show all relevant workings)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started