Gold Coast Ltd commences construction of a multipurpose water part on 1 July 20x2 for Brisbane Ltd. Gold Coast Ltd signs a fixed price contract for total revenues of $100 million. The project is expected to be completed by the end of 20x5 and Brisbane Ltd controls the asset throughout the period of construction. The expected cost as at the commencement of construction is $76 million. The estimated costs of a construction project might change throughout the project-in this example, they do change. The following data relates to the project (the financial years end on 30 June): 20x3 ($m) 20x4 ($m) 20x5 ($m) 20 36 24 for the year 20 56 80 Costs incurred to date - 56 24 24 40 36 Estimated costs to complete Progress billings during the year Cash collected during the year 22 38 40 Required: (a) Using the above data, compute the gross profit to be recognised for each of the three years, assuming that the outcome of the contract can be reliably estimated. (3 marks) Year Gross profit ($) 20x3 20x4 20x5 (b) Prepare the journal entries for the 2003 financial year to recognise revenue on the assumption that the revenue shall be recognised across the life of the construction contract. (4 marks) Date of Debit Credit Transaction Accounts $) ($) 30 June 20x3 Construction in progress Materials, cash, payables, accumulated depreciation, etc. 1 11.2.3.4.5.6.7.8.9. 10. 1 11 | 12 | 13 | 14 | 15 | 16 | 17 (c) Prepare the journal entries for the 20x3 financial year, assuming that the measure of progress on the contract cannot be reliably assessed. This is independent from question (b). (4 marks) Date of Debit Credit Transaction Accounts ($) ($) 30 June 20x3 Construction in progress Materials, cash, payables, accumulated depreciation, etc