Record the adjusting journal entries in the books

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Question - On 1 July 2019, Pro-Property Ltd entered into an agreement with a customer to construct a plant over a period of 12 months for a total price of R25,000,000. The agreement includes an obligation to obtain machinery for the plant and transfer it to the customer at cost. Control of the machinery will be transferred to the customer six months after the construction of the plant begins. Pro-Property measures its performance by using the percentage of costs incurred compared to the total estimated costs of the project. The total estimated cost of the project is R22,200,000, of which machinery represents a significant portion.

Pro-Property Ltd purchased the machinery from a supplier for R8,000,000 on 1 January 2020 and delivered it to the customer's premises without being involved in the design or manufacture of the machinery. On the same date of delivery, the total project cost incurred (including the cost of the machinery) amounted to R16,800,000.

The accountant recorded revenue of R20,350,000 on this transaction.

REQUIRED - Record the adjusting journal entries in the books of Pro- Property Ltd.

Reference no: EM133035937

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