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Question Two On 1 January 2019, Mr

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Question Two On 1 January 2019, Mr. COVID entered into a contract with a customer to construct a specialized building for consideration of GH¢2,000,000 plus a bonus of GH¢400,000 if the building is completed within 18 months. Estimated costs to construct the building were GH¢1,500.000. If the contract is terminated by the customer, Mr. COVID can demand payment for the costs incurred to date plus a mark-up of 30%. On 1st January 2019, as a result of factors outside of its control, Mr. COVID was not sure whether the bonus would be achieved. At 31st December 2019 Mr. COVID had incurred costs of GH¢1,000,000. They were still unsure as to whether the bonus target would be met. Mr. COVID measures progress towards completion based on costs incurred. At 31st December 2019, Mr. COVID had received GH¢1,000,000 from the customer. Page 1 of 4 a) You are required to explain how the above transaction would be accounted for the year ended 31st December 2019. b) Based on your explanation to (a) above determine the following to the nearest cedi: i. Overall Contract Profit ii. Stage of Completion using the cost base method iii. Profit to recognise at 31st December, 2019 iv. Amount Due from Customer