Zimba Construction Co has been awarded a fixed price contract to build a Clinic by the government. The initial amount of revenue agreed is the K1, 100,000. At the beginning of the contract on 1 January 20X6 Zimba initial estimate of the contract costs is K1, 000,000. At the end of 20X6 the estimate of the total costs has risen to K1, 010,000. During 20X7 the customer agrees to a variation which increases expected revenue from the contract by K25, 000 and causes additional costs of K15, 000. At the end of 20X7 there are materials stored on site for use during the following period which cost K12, 500. Zimba has decided to determine the stage of completion of the contract by calculating the proportion that contract costs incurred for work to date bear to the latest estimated total contract costs. The contract costs incurred at the end of each year were 20X6: K262, 600, 20X7: K771, 000 (including materials in store), 20X8 K1, 025,000.

Required

Calculate the stage of completion for each year of the contract and show how revenues, costs and profits will be recognized in each year.