Problem: (40 Marks) A company XYZ Ltd was contracted to

Problem: (40 Marks)
A company XYZ Ltd was contracted to build a new football stadium for the AFL at a contracted price of $60 million. This was to be billed and paid for in three equal annual instalments at the end of each financial year for $20 million.
Costs were as follows
Year ended
Expected
Actual
30-6-2007
15 million
15 million
30-6-2008
18 million
21 million
30-6-2009
19 million
19 million
Total
52 million
55 million
Using an independent survey it was determined that the stage of competition was:
At the year ended 30-6-2007 30%
At the year ended 30-6-2008 60%
At the year ended 30-6-2009 100%
Requirements:
a) Calculate the gross profit/loss for the year ended 30 June 2007 30 June 2008 and 30 June 2009. You are required to provide all the relevant workings. (7.5 Marks) Provide the journal entries with narrations for the years ended 30 June 2007 30 June 2008 and 30 June 2009. (9.5 Marks)
b) Now assume the actual costs for construction for the 2nd year (i.e for the year ended 30-6-2008) were 30 million instead of 21 million. What would be your new gross profit/loss be for each year. You are required to provide all the relevant workings. (7.5 Marks) Provide the journal entries with narrations for the years ended 30 June 2007 30 June 2008 and 30 June 2009. (9.5 Marks)
c) XYZ Ltd used an independent survey to establish how much work had been completed at the end of each year what other choices did they have? (6 Marks)
In the awarding of marks for numerical questions consideration will be given to:
correctness of answers;
appropriate formatting and headings;
relevant workings;
approach taken to solve the problem; and
completeness of answers.
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