Construction Contracts

Question 1

If in early stage… or predicted to make loss

Answer 1

Income statement only- write off cost with balancing revenue

Question 2

Second year

Answer 2

Calculate loss
Calculate % complete
Income statement- use % and take off costs already accounted for in previous years, income statement total should equal profit/loss in second year- add a provision

Sofp= work in progress heading, costs incurred +profit/loss, less progress billing= amount charged to customer
Receivable= progress billing- payment

Question 3

Definition of construction contract

Answer 3

Negotiated for an asset that are related by design, technology and function. Large and complex, spam more than one accounting period

Question 4

Types

Answer 4

External assessor- work certified method
Costs incurred method or percentage completion
Completed contract- income measured when contract completed