Details of construction contract for building a bridge are as follows:

Contract term 1 Jan 2016 to 31 Dec 2018

Total revenue $12,000,000

Total estimated costs $10,000,000

Information for the 3 years ended 31 December:

	2016	2017	2018
Actual costs incurred to date	2,800,000	9,095,000	11,000,000
Estimated costs to complete	7,200,000	1,605,000	0

Required:

a) Under FRS115, revenues of construction contracts should always be recognized progressively over the life of the contract.

Explain why this statement is false.

Calculate contract revenue, contract expenses, and contract profit to be progressively recognised for each of the 3 financial years, assuming that FRS115 is the applicable standard and that this contract meets FRS115 criteria for revenue and costs to be recognised progressively over time. (24 marks)

Percentage of completion: Cost incurred to date ------------------------------- Total estimated cost

Year 2016

Year 2017

Year 2018

	Total to date	Prior year	Current year
31 December 20X6: Construction revenue Construction expenses Gross Profit
31 December 2017: Construction revenue Construction expenses Gross profit/(loss)
31 December 2018 Construction revenue Construction expenses Gross profit