Jordan is a construction contract company involved in building commercial properties. Its current policy for determining the percentage of completion of its contracts is based on the proportion of cost incurred to date compared to the total expected cost of the contract. One of Jordan's contracts has an agreed price of $250 million and estimated total costs of $200 million. 30 The cumulative progress of this contract is: Year ended: 30 September 2011 September 2012 Smillion Smillion Costs incurred 80 145 Work certified and billed 75 160 Billings received 70 150 Based on the above, Jordan prepared and published its financial statements for the year ended 30 September 2011. Relevant extracts are: Statement of Profit and Loss Smillion Revenue (balance) 100 Cost of sales (80) 20 Smillion Profit (50 x 80/200) Statement of financial position Current assets Amounts due from customers Contract costs to date Profit recognised 80 20 Progress billings 100 (75) 25 5 Contract receivables (75-70) Smillion Current assets Amounts due from customers Contract costs to date Profit recognised 80 20 Progress billings 100 (75) 25 Contract receivables (75 - 70) 5 Jordan has received some adverse publicity in the financial press for taking its profit too early in the contract process, leading to disappointing profits in the later stages of contracts. Most of Jordan's competitors take profit based on the percentage of completion as determined by the work certified compared to the contract price. Required: (1) Assuming Jordan changes its method of determining the percentage of completion of contracts to that used by its competitors, and that this would represent a change in an accounting estimate, calculate equivalent extracts to the above for the year ended 30 September 2012 (5marks) (ii) Explain the Criteria for Recognising Revenue from contract with customers. (2 Marks). (iii) Explain the difference between Revenue Recognition from construction contracts when The contract is profit making and when losses are probable. (3Marks) .........The End......... Page 1 of 6