Question 6
In 20X5, Build-It Corp. (BIC) was awarded a fixed-price contract of $9,400,000 to construct a warehouse for a client. Work began in 20X5 and was completed in 20X7. BIC originally estimated the project costs at $8,500,000. A schedule of actual costs and revised estimates, together with progress billings and collections, follows:
* This revised cost data was not known in 20X5.
** This revised cost data was not known in 20X6.
BIC reports its financial results in accordance with IFRS. Its year end is December 31. It uses the cost-to-cost method to determine construction revenue. Project completion is considered a single performance obligation that will be satisfied over time.
Required:
Prepare all required summary journal entries complete with explanations for each of the 20X5, 20X6, and 20X7 fiscal years. (Round the percentage of completion to one significant decimal place — for example, 16.4% — to determine the amount of revenue to be recognized in each year.)
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