Question 3 Wynne Construction Limited currently has two large scale projects in progress. It has been commissioned by the Department of Education and Skills to construct an education campus in South Tipperary. The 50m contract with a 10% retention rate, commenced on 16 January 2014 and its anticipated completion date is 1* December 2017. Last year Wynne Construction Ltd won a contract valued at 100m for the pharmaceutical giant Berry ple, to build a new research and development facility, including road infrastructure upgrade in Athlone. Construction commenced on 1" July 2015 and is anticipated to be complete by December 2019. The retention rate on this contract is 20% The company prepares its accounts to 30 June cach year. The following details have been extracted in relation to these two contracts: R & D Facility Education Campus 000 10,000 '000 15,000 10.000 1.000 500 Plant sent to site at beginning of projecte At 1" July 2015 Accumulated cost of work certified to date Materials on hand Accrued wages and salaries Transactions during the year Materials sent to site Wages and salaries Production overhead At 30 June 2016 Materials on site Accrued wages and salaries Accumulated value of work certified Cost of work not certified Estimated costs to complete 11,000 4,000 3.000 10,000 2.000 1,500 6,000 1,000 2.000 500 37,000 4,000 13,000 Note 2 58,000 Additional Information Note 1: Depreciation is charged on plant using the straight-line method of depreciation at 10% per annum. Note 2: Surveyors report not yet available. Note 3: Stage payments have been received from the Berry ple equal to the value of work certified less the contracted retention Requirement: (a) Write a note to Wynne Construction Limited outlining the factors to be considered in determining the attributable profit or loss of a contract which, in compliance with accounting regulations, can be recognised in a financial year. 5 Marks (b) Show the contract accounts for each project for the year ended 30 June 2016. 8 Marks (c) Compute the profit or loss and attributable sales revenue to be recognised on cach contract. 7 Marks Question 3 Wynne Construction Limited currently has two large scale projects in progress. It has been commissioned by the Department of Education and Skills to construct an education campus in South Tipperary. The 50m contract with a 10% retention rate, commenced on 16 January 2014 and its anticipated completion date is 1* December 2017. Last year Wynne Construction Ltd won a contract valued at 100m for the pharmaceutical giant Berry ple, to build a new research and development facility, including road infrastructure upgrade in Athlone. Construction commenced on 1" July 2015 and is anticipated to be complete by December 2019. The retention rate on this contract is 20% The company prepares its accounts to 30 June cach year. The following details have been extracted in relation to these two contracts: R & D Facility Education Campus 000 10,000 '000 15,000 10.000 1.000 500 Plant sent to site at beginning of projecte At 1" July 2015 Accumulated cost of work certified to date Materials on hand Accrued wages and salaries Transactions during the year Materials sent to site Wages and salaries Production overhead At 30 June 2016 Materials on site Accrued wages and salaries Accumulated value of work certified Cost of work not certified Estimated costs to complete 11,000 4,000 3.000 10,000 2.000 1,500 6,000 1,000 2.000 500 37,000 4,000 13,000 Note 2 58,000 Additional Information Note 1: Depreciation is charged on plant using the straight-line method of depreciation at 10% per annum. Note 2: Surveyors report not yet available. Note 3: Stage payments have been received from the Berry ple equal to the value of work certified less the contracted retention Requirement: (a) Write a note to Wynne Construction Limited outlining the factors to be considered in determining the attributable profit or loss of a contract which, in compliance with accounting regulations, can be recognised in a financial year. 5 Marks (b) Show the contract accounts for each project for the year ended 30 June 2016. 8 Marks (c) Compute the profit or loss and attributable sales revenue to be recognised on cach contract. 7 Marks
