It is corporate accounting

Question 5 (10 marks) WOWO Group is accounting for a long-term construction contract using the percentage-of- completion method. The 4-year contract is currently in its second year. The latest estimates of total contract costs indicate that the contract will be completed at a prot to WOWO Group. Required: (a) What is the theoretical justication for WOWO Group's use of the percentage-of- completion method? (1 mark) (b) How would progress billings be accounted for? Include in your discussion the classication of progress billings in WOWO Group's nancial statements. (3 marks) (c) How would the income recognized in the second year of the 4-year contract be determined using the cost-tocost method of determining percentage of completion? (3 marks) (d) What would be the effect on earnings per share, in the rst year of the 4-year contract, if using the percentage-of-completion method instead of the cost-recovery method? Discuss. (3 marks) [Total for Question 5: 10 marks]