QUESTION

Buildit Plc has agreed to build a bridge on a UK government contract. The company has no other contracts in progress and no other sources of income. The bridge will take three years to complete. The contract price is 12 million. Buildit Plc recognises profit and turnover on the basis of the proportion of work certified by an independent architect. On 31 December 2020 the company's trial balance was as follows:

	'000	'000
Revenue		3,600
Retention	900
Material and Labour costs	2,700
Bank	4,050
Trade payables		1,500
Share capital		1,200
Retained earnings	_____	1,350
	7,650	7,650

The architect inspected the work done to date just before the year end and certified that the work to the value of 3,600,000 had been completed. This was invoiced to the customer, and in accordance with the contract, 75% of the invoice amount was paid immediately, with the remainder being held back as retention. The directors estimate that it will cost a further 5,200,000 to complete this contract.

Required:

1. Prepare, in as far as the information permits, statement of income and a statement of financial position for Buildit Plc as at 31^st December 2020.

(11 marks)

2. Assuming all other figures remain the same, recalculate the profit for the year ended 31 December if the contract price was for 15m.

(4 marks)

3. Intangible assets are determined by 1AS 38 as non- monetary assets without

Physical substance. Discuss the criteria for the initial recognition and measurement of intangible assets.

(7 marks)