QUESTION EIGHT (Groups 2 and 18) Luyando Ltd is in the intermediate stage of a construction contract for the building of a new privately owned road bridge over river Luangwa. The original details of the contract are Approximate duration of a contract: Date of commencement: Total contract price Estimated total cost: 3 years 1-10-17 K40 billion K28 billion An independent surveyor r certified the value of the work in progress as follows - On 31 March 2018 K12 billiorn - On 31 January 2019 K30 billion Total costs incurred at On 31 March 2018 On 31 January 2019 K9 billior K28.5 billion Progress billings at 31-01-19 were K25 billion On 1st April 2018 Luyando Ltd agreed to a contract variation that would involve an additional K5 billion contract revenue with associated additional estimated costs of K2 ion The costs incurred during the year to 31 -01-19 include K2.5 billion relating to the replacement of some bolts which had been made from material that had been incorrectly specified by the firm of civil engineers who were contracted by Luyando Ltd to design the bridge. These costs were not included in the original estimates, but Luyando Ltd is hopeful that they can be recovered from the firm of civil engineers.Luyando Ltd calculates profit on contracts using the percentage of completion method. T certified to date compared to the total contract price he percentage of completion of the contract is based on the value of the work Required (a) Prepare the income statement and balance sheets extracts in respect of the contract for the year to 31 -01-19 only (17 Marks) (b) Describe any four (4) problems posed by contract costing in this contract (8 marks) TOTAL 25 Marks] QUESTION EIGHT (Groups 2 and 18) Luyando Ltd is in the intermediate stage of a construction contract for the building of a new privately owned road bridge over river Luangwa. The original details of the contract are Approximate duration of a contract: Date of commencement: Total contract price Estimated total cost: 3 years 1-10-17 K40 billion K28 billion An independent surveyor r certified the value of the work in progress as follows - On 31 March 2018 K12 billiorn - On 31 January 2019 K30 billion Total costs incurred at On 31 March 2018 On 31 January 2019 K9 billior K28.5 billion Progress billings at 31-01-19 were K25 billion On 1st April 2018 Luyando Ltd agreed to a contract variation that would involve an additional K5 billion contract revenue with associated additional estimated costs of K2 ion The costs incurred during the year to 31 -01-19 include K2.5 billion relating to the replacement of some bolts which had been made from material that had been incorrectly specified by the firm of civil engineers who were contracted by Luyando Ltd to design the bridge. These costs were not included in the original estimates, but Luyando Ltd is hopeful that they can be recovered from the firm of civil engineers.Luyando Ltd calculates profit on contracts using the percentage of completion method. T certified to date compared to the total contract price he percentage of completion of the contract is based on the value of the work Required (a) Prepare the income statement and balance sheets extracts in respect of the contract for the year to 31 -01-19 only (17 Marks) (b) Describe any four (4) problems posed by contract costing in this contract (8 marks) TOTAL 25 Marks]