Quickbuild Ltd entered into a two-year contract on 1 January 20X7 at a contract price of…

Quickbuild Ltd entered into a two-year contract on 1 January 20X7 at a contract price of £250,000. The estimated cost of the contract was £150,000. At the end of the first year the following information was available:

● contract costs incurred totalled £70,000;

● inventories still unused at the contract site totalled £10,000;

● progress payments received totalled £60,000;

● other non-contract inventories totalled £185,000. Invoices issued £65,000. The problem is to be considered under two different scenarios:

Case A where the accounting is to be performed under the percentage of completion method as required under IAS 11.
Case B where the accounting is done under the milestone method and the customer gains control of 40% of the facility at the end of the first year.

Required:

(a) Calculate the statement of comprehensive income entries for the contract revenue and the contract costs for each case.

(b) Calculate entries in the statement of financial position for the amounts due from construction contracts and inventories for each case.

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