Question 6 (8 marks) In 20X5, Build-It Corp. (BIC) was awarded a fixed-price contract of $9,400,000 to construct a warehouse for a client. Work began in 20X5 and was completed in 20X7. BIC originally estimated the project costs at $8,500,000. A schedule of actual costs and revised estimates, together with progress billings and collections, follows: (in $'000s) 20X5 20X6* 20X7** Cumulative costs incurred 1,900 6,400 8,800 Estimated costs to complete 6,800 2,800 0 Progress billing during the year 2,200 6,800 400 Collections during the year 1,500 7,000 900 * This revised cost data was not known in 20X5. ** This revised cost data was not known in 20X6. BIC reports its financial results in accordance with IFRS. Its year end is December 31. It uses the cost-to-cost method to determine construction revenue. Project completion is considered a single performance obligation that will be satisfied over time. Intermediate Financial Reporting 1 Project 1 7 / 9 Required: Prepare all required summary journal entries complete with explanations for each of the 20X5, 20X6, and 20X7 fiscal years. (Round the percentage of completion to one significant decimal place for example, 16.4% to determine the amount of revenue to be recognized in each year.)

Question 7 (7 marks) Extracts from Bonsai Products Corp.'s (BPC) unadjusted trial balance for its year ended December 31, 20X7, appear below: Bonsai Products Corp. Unadjusted trial balance (extracts) As at December 31, 20X7 Account Debit Credit Prepaid expenses 3,500 Note receivable 69,302 Office building 400,000 Accumulated depreciation office building 215,625 Computer equipment 16,400 Accumulated depreciation computer equipment 7,900 BPC reports its financial results in accordance with IFRS. It uses a perpetual system to account for its inventory. The company's policy is that it only prepares accruals and adjusting entries at year end. Pertinent information follows: On June 1, 20X7, BPC paid $2,400 for an insurance policy that provides for fire damage from June 1, 20X7, to May 31, 20X8. The insurance premium was debited to prepaid expenses. The pre-existing balance in this account was for another annual insurance policy that expired on May 31, 20X7. BPC depreciates its building on a straight-line basis over 20 years. The estimated residual value of the building at the end of its useful life is $25,000. BPC depreciates its computer systems using the declining balance method at a rate of 40% per year. There were no additions or disposals of computers during the year. On October 1, BPC sold a 24-month service agreement for $24,000 covering the period from December 1, 20X7, to November 30, 20X9, crediting unearned revenue. BPC's policy Intermediate Financial Reporting 1 Project 1 8 / 9 is to recognize revenue equally over the life of the service agreement. Related expenses have already been recognized in the company's accounts. The note receivable was taken on February 1, 20X7. It is repayable at $20,000 per annum, first due February 1, 20X8. The payment includes interest at 6% per annum, which is the market rate of interest for loans of this nature. BPC's review of its shipping records indicates that inventory costing $700 was sold FOB destination on account for $1,100 on December 28, 20X7, but was not delivered until January 8, 20X8. BPC recorded the sale on December 28. Required: Prepare all required adjusting journal entries for the year ended December 31, 20X7.