Skater Life Inc. (SLI) is a publicly traded Canadian company that designs and constructs skateboarding parks for schools and municipalities. Since skateboarding was added to the Olympics in 2020 the sport has become very popular, and municipalities have been adding larger skateboarding park facilities to their city owned parks. It is February 6, 2023, and you are a coop student working on the preparation of the December 31, 2022, financial statements of SLI

City of Waterloo Contract (68 marks) SLI entered a contract with the City of Waterloo on January 1, 2021, to design and construct a large skateboarding park at Waterloo Park. The contract provides that SLI will provide all design, engineering and construction labour and will provide all materials required for the construction of the skate park. The skate park is constructed on site at the park location, i.e., the construction team pours the concrete, creates the bowls, ramps etc. on site at the park. The contract is a fixed-price contract in the amount of $2,400,000. At the time of signing the contract, SLI had estimated that the total contract costs would be $1,987,000. The contract provides that if the skate park is not completed by March 31, 2023, the contract price will be reduced by $30,000. The contract includes the following billings with payment due on the billing date: December 31, 2021 $1,000,000 December 31, 2022 $890,000 Balance on project completion The 2021 costs incurred were $894,150. At the end of 2021 the operating team reviewed the construction schedule and was very confident that the project would be completed by March 31, 2023. The operating team concluded that it was highly probable that the penalty clause would not be applied. The costs for the project were reviewed on December 31, 2021, and the project team concluded that the contract would result in a $413,000 gross margin. The 2022 costs incurred were $900,000. The cost of concrete and steel both increased during 2022. Both materials represent a significant input cost to the construction of skateboarding parks. On December 31, 2022, the project team estimated that a total of $710,000 will be required to complete the project. SLI has several projects on the go at the same time and therefore needs to schedule its construction team to the various project locations. It was necessary to make a scheduling change during 2022 and part of the Waterloo Park construction team was reassigned to a City of London project for 4 months. This resulted in a change in the expected completion date of the Waterloo Park project. The operating team concluded on December 31, 2022, that the City of Waterloo project will be completed by the end of April 2023.