Tinka Ltd signs a contract on 1 May 2018 to build an office building. The construction is scheduled to commence 1 July 2018 and the estimated date of completion is 30 June 2021. The cost of the building is estimated to be $120m and the total contract price is fixed at $134m. The following data relates to the construction period:


For the year ended 30 June
2019 2020 2021
$’000 $’000 $’000
Costs to date 48,000 84,000 120,000
Estimated Costs to complete 72,000 36,000
Progress billings to date 40,000 84,000 134,000
Cash received to date 19,000 79,000 134,000


Assume that actual costs and cash collections coincide with expectations and that cost (an input measure) is used as the basis for assessing progress on the construction contract.



Assuming the level of progress can be reliably measured:


  1. Determine the percentage of completion for 2019, 2020 and 2021.        (11 marks)


2019 2020 2021
$’000 $’000 $’000
Costs to date
Costs incurred for the year
Estimated costs to complete
Estimated total cost  
Per cent of completion (POC)  




  1. Calculate the gross profit for 2019, 2020 and 2021. (13 marks)
2019 2020 2021
$’000 $’000 $’000
Estimated total gross profit      
POC x Estimated total gross profit
Less Gross profit recognised in previous years
= Gross profit recognised for the year
Construction revenue for the year


  1. Using the percentage of completion method, provide the journal entries for 2019, 2020 and 2021. (9 marks)


2019 2020 2021
(i) To record costs incurred:
(ii) To record billings to customers:
(iii) To record cash collections:
(iv) To record periodic income recognised:



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