Question 3 (a) Constructions Limited is engaged in the business of constructing Flyovers and Railway over bridges. It obtained a contract from…

Question 3 (a) Constructions Limited is engaged in the business of constructing Flyovers and Railway over bridges. It obtained a contract from Railway Authorities to construct a railway over bridge for 400 crores. The construction of the railway over bridge is expected to be completed in 4 years. At the outset of the contract, it was estimated that the total costs to be incurred will be 370 crores but by the end of year 1, this estimate stands revised to 375 crores. During year 3, the Construction Limited has requested for a variation in the contract which is approved by Railway Authorities and accordingly the total contract value will increase by 10 crores and costs will increase by 7 crores. The Constructions Limited decided to measure the stage of completion on the basis of the proportion of contract costs incurred to the total estimated contract costs. Contract costs incurred at the end of each year is: Year 1 98.8 crores Year 2 202.4 crores Year 3310 crores (including unused material of 3 crores) Year 4 382 crores You are required to: (1) Calculate stage of completion of contract for each year (2) Profit to be recognised for each year.