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On 17 February 2002 Flagstaff Development Limited signed a contract with its client in Hamilton...

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Accounting

On 17 February 2002 Flagstaff Development Limited signed a contract with its client in Hamilton to construct a 7-storey office building in Gordonton. The contract scheduled to be completed on 30 August 2004 has a fixed contract price of $25 million without any price escalation clause. The building team of Flagstaff Development Limited made a preliminary estimate of $20 for the cost of the construction contract. The outcome of the construction contract can be reliably estimated and following details relates to the project:

Details

2002

($ million)

2003

($ million)

2004

($ million)

Costs incurred for the year

6

9

8

Estimated costs to complete

14

8

-

Progress billings during the year

7

11

7

Cash collected during the year

6

10

7

The companys financial year end is 31 December.

Required:

  1. Prepare journal entries in the books of Flagstaff Development Limited to account for all transactions related to the construction of the office building for each of the financial year ending 31/12/2002, 31/12/2003 and 31/12/2004

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