During its financial year ended 30 June 20X7 Beavers, an engineering company, has worked on…
During its financial year ended 30 June 20X7 Beavers, an engineering company, has worked on several contracts. Information relating to one for Dam Ltd which is being constructed to a specific customer design is given below:
The plant and equipment is expected to have a book value of about £1,000 when the contract is completed.
At 30 June 20X7 it is estimated that work to a cost value of £19,000 has been completed, but not included in the certifications as the customer did not have control of that work which was performed off-site.
If the contract is completed one month earlier than originally scheduled, an extra £10,000 will be paid to the contractors. At the end of June 20X7 there seemed to be a ‘good chance’ that this would happen. Assume the output method is appropriate.
(a) Show the account for the contract in the books of Beavers up to 30 June 20X7 (including any transfer to the statement of comprehensive income which you think is appropriate).
(b) Show the statement of financial position entries.
(c) Calculate the profit (or loss) to be recognised in the 20X6–X7 accounts.