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Bailey constructs buildings for customers which can take many years to complete. Bailey has three contracts in progress at 30 September 20×7, which are detailed below. All of the contracts below began in the current year.
Contract 1 Contract 2 Contract 3
RM ‘000 RM ‘000 RM ‘000
Price 10,000 8,000 4,000
Costs incurred to date -6,000 -4,000 -500
Costs to complete -1,000 -6,000 -2,000
Progress 80% 60% 25%
Amount billed to date 7,000 3,000 1,000
What cost of sales should be recorded (to the nearest thousand) in relation to contract 2?
Have you tried to solve it yourself? I’ll happily help by explaining where you have gone wrong but firstly you need to have given it a go yourself.
Let me know how you get on and I’ll then help.