Professional Documents
Culture Documents
Problem I
1. Input Measure - Percentage of Completion Method (Cost to Cost Method)
2008:
Contract price P
1,800,000
Actual costs to date P 450,000
Estimated costs to 1,200,000
complete
Total estimated project 1,650,000
costs
Estimated total gross profit 150,000
Percentage of completion:
P450,000 / P,1650,000 27.27%
Gross profit recognized P 40,905
2009: P
1,800,000
Contract price
Costs
incurred:
2008 P 450,00
2009 1,100,000
Total cost 1,550,000
Total gross profit 250,000
Recognized in 2008 40,905
Recognized in 2009 P 209,095
Problem II
1. Input Measure - Percentage of Completion Method (Cost to cost Method)
Years Gross Profit (or Loss) Supporting computations
recognized
2008 P 2 million (P108 90) x (P30/P90) = P6
million
2009 ( P18 million) Total loss is (P108 120) = (P12
million)
To date, P6 million was recorded:
therefore, (P12 million) P6 million
= (P18 million) in 2009
2010 P 10 million Total loss is P 108 110) = (P2
million)
To date, (P 12 million was recorded:
therefore, ( P2 million) (P12
million) = P10 million in 2010
2. Input Measure - Cost Recovery Method
Years Gross Profit (or Loss) Supporting computations
2008 P -0- ( P108 90) = P18 anticipated
gross profit, so no need to
recognized a gross loss
2009 (P 12 million) Total loss is ( P108 120) = (12
million)
2010 P 10 million Total loss is (P108- 110) ( P2
million)
To date, ( P12 million was recorded:
therefore, ( P2 million) ( P12
million) = P10 million in 2010
Problem III
1. Journal Entries
a. Input Measure Percentage of completion (cost-to-cost method)
The following analysis is to determine the percentage of completion:
20x3 20x4 20x5
Contract price:
Initial amount of contract... P528,000 P528,000 P528,000
Variation.. _______- __12,000 __12,000
Total contract price.. P528,000 P540,000 P540,000
Costs incurred each year P 126,048 *P244,032 P121,920
Add: Costs incurred in prior years. _______- _126,048 _370,080
Actual costs incurred to date (1).. P126,048 *P370,080 P492,000
Add: Estimated costs to complete.. _358,752 _121,920 _______-
Total estimated costs (3).. P484,800 P492,000 P492,000
Estimated gross profit P 43,200 P 48,000 P 48,000
Percentage of completion (1) / (3) 26% **74% 100%
* including the P7,200 additional costs in 20x4.
** it should be noted that the percentage of completion for 20x4 is calculated by deducting the P6,000 of
materials held for the following period from the costs incurred up to that year end, i. e., P370,080 P6,000 =
P364,080, P364,080 / P492,000 = 74%.
The revenue, expenses (costs) and profit will be recognized in profit or loss as follows:
Recognized in Recognized in
20x3 To date prior years current year
Revenue (P528,000 x 26%) P 137,280 - P 137,280
Costs/Expenses (P484,800 x 26%) 126,048 - 126,048
Gross Profit (P43,200 x 26%) P 11,232 - P 11,232
Recognized in Recognized in
20x4 To date prior years current year
Revenue (P540,000 x 74%) P 399,600 P 137,280 P 262,320
Costs/Expenses (P492,000 x 74%) _364,080 _126,048 238,032
Gross Profit (P48,000 x 74%) P 35,520 P 11,232 P 24,288
Alternatively, the gross profit recognized each year may also be computed as follows:
20x3 20x4 20x5
Contract price:
Initial amount of contract....... P528,000 P528,000 P528,000
Variation _______- __12,000 12,000
Total contract price P528,000 P540,000 P540,000
Costs incurred each year. P126,048 P240,032 P121,920
Add: Costs incurred in prior years.. _______- _126,048 _370,080
Actual costs incurred to date (1)... P126,048 P370,080 P492,000
Add: Estimated costs to complete _358,752 _121,920 _______-
Total estimated costs (3)... P484,800 P492,000 P492,000
Estimated gross profit P 43,200 P 48,000 P 48,000
Percentage of completion (1) / (3)... ____26% ____74% ___100%
Gross profit to date. P 11,232 P 35,520 P 48,000
Less: Gross profit in prior years. _______- ___11,232 __35,520
Gross profit in current year -% of completion P 11,232 P 24,288 P 12,480
Gross profit in current year cost recovery
method P 0 P 0 P 48,000
3. To record collections:
120,00 228,00 192,00
Cash..... 0 0 0
Accounts 120,00 228,00 192,00
receivable 0 0 0
The revenue, expenses (costs) and profit will be recognized in profit or loss as follows:
Recognized in Recognized in
20x3 To date prior years current year
Revenue* P 126,048 - P 126,048
Costs/Expenses 126,048 - 126,048
Gross Profit P 0 - P 0
* equivalent to costs incurred
Recognized in Recognized in
20x4 To date prior years current year
Revenue* P 364,080 P 126,048 P 238,032
Costs/Expenses _364,080 126,048 238,032
Gross Profit P 0 P 0 P 0
* equivalent to costs incurred
Recognized in Recognized in
20x5 To date prior years current year
Revenue (P540,000 x 100%) P 540,000 P 364,080 P 175,200
Costs/Expenses (P492,000 x 100%) _492,000 364,080 127,920
Gross Profit (P48,000 x 100%) P 48,000 P 0 P 48,000
Alternatively, the gross profit recognized each year may also be computed as follows:
20x3 20x4 20x5
Contract price:
Initial amount of contract....... P528,000 P528,000 P528,000
Variation _______- __12,000 12,000
Total contract price P528,000 P540,000 P540,000
Costs incurred each year. P 126,048 P244,032 P 121,920
Add: Costs incurred in prior years.. _______- _126,048 _370,080
Actual costs incurred to date .... P 126,048 P370,080 P492,000
Add: Estimated costs to complete ____ _? ____ _? _______-
Total estimated costs .... P ? P ? P492,000
Estimated gross profit. P 0 P 0 P 48,000
Percentage of completion.. _ -___ _ -___ ___100%
Gross profit to date. P 0 P 0 P 48,000
Less: Gross profit in prior years. _______- _______- __ 0
Gross profit in current year... P 0 P 0 P 48,000
3. To record collections:
120,00 228,00 192,00
Cash..... 0 0 0
Accounts 120,00 228,00 192,00
receivable 0 0 0
5. To close Construction In
Progress**
and Progress Billings account:
Progress 540,00
billings 0
Construction In 540,00
Progress. 0
* The term Contract account may alternatively be used.
** If Contract account is used then no entry is required for No. 5.
Current Liability:
Payables (Payments on Account)
Progress billings P144,000
Less: Construction In Progress. _137,280
Gross amount due to
customers P 6,720
Current Liability:
Payables (Payments on Account)
Progress billings P 137,280 P384,000
Less: Construction In Progress. _144,000 _364,080
Gross amount due to
customers P 6,720 P 19,920
Construction In Progress Progress Billings
Problem IV
1. Anticipated/Gross Loss
a. Input Measure Percentage of Completion (Cost-to-Cost Method)
2008:
Contract price P2,500,000
Actual cost to date P1,500,00
0 a.
Estimated costs to complete 1,200,000 Input
Total estimated project costs 2,700,000
Estimated loss, recognized in 2008 P
(200,000)
2009:
Contract price P
2,500,000
Costs incurred: In 2008 P1,500,00
0
In 2008 1,300,000
Total cost 2,800,000
Total loss P
(300,000)
Recognized in 2008 (200,000)
Recognized in 2009 P
(100,000)
Measure Cost Recovery Method
Loss in 20x4 P( 200,000)
Loss in 20x5 P (100,000)
2. Journal Entries
a. Input Measure Percentage of Completion (Cost-to-Cost Method)
2008:
Construction in progress 1,500,000
Various credits 1,500,000
Cash 1,000,000
Accounts receivable 1,000,000
Cash 1,500,000
Accounts receivable 1,500,000
Problem V
Item to compute Answer
Total revenue recognized during 2009 (w): P50 million
CIP contains cost + gross profit = revenue, so w = P50 P 15
million
Gross profit recognized during 2009 (x): P50 P35 = P15
Billings on construction (y) : P14 + P 46 = P60 P60million
Net billings in excess of construction in progress (z): Billings of P60 P10 million
CIP of P50
Calculate the percentage of PAC that was completed during 2009:
50/150 = 33.33% 333.33%
Problem VI
Item to compute Answer
Cash collected by KP on Cincy One during 2009. (P75 billings P10 P65 million
A/R)
Actual costs incurred by KP on Cincy One during 2009 (P66 CIP P22 P44 million
gross pofit)
At 12/31/2009, the estimated remaining costs to complete Cincy One P156
(44/{44 + x})(300 {44 + x}) = 22; x = 156 million
The percentage of Cincy One that wa completed during 2009 100 x 22%
(44/ {44 + 156})
Problem VII
1.
Progress billings on construction contract P562,000
Less accounts receivable 150,500
Cash collected in 20x4 P411,500
2.
Gross profit from construction contract + Construction in progress = Revenue for 20x4
P301,000 + P602,000 = P903,000
P903,000/P7,525,000 = 12% Percentage completed in 20x4
P301,000/.12 = P2,508,333 Estimated income on construction contract
Problem VIII
1. Percentage of Completion Method (Cost-to-cost Approach)
20x4 20x5 20x6
Contract price ................... P250,000 P250,000 P250,000
Current year costs ............... 110,000 120,000 15,000
Costs to date .................... 110,000 230,000 245,000
Estimated cost to complete ....... 100,000 20,000 0
Estimated total cost ............. 210,000 245,000 240,000
Estimated total gross profit ..... 40,000 5,000 5,000
Percent complete ................. 52% 94% 100%
Revenue to date .................. P130,000 P230,000 P250,000
Problem IX
*P150,000 + 7,500 + 157,500 + 100,000 costs incurred during the year 27,500
loss
2. b
P7,200,000
x (P15,000,000 P12,000,000) = P1,800,000.
P7,200,000 + $4,800,000
3. c
P1,170,000
- x (P3,300,000 P1,950,000) = P810,000
P1,950,000
4. d
Under the percentage of completion method, the Construction-In-Progress account is
used for cost incurred during the year and any realized gross profit (loss). The following
T-account is prepared:
Construction-In-Progress
CI in 2004 210,000
RGP in 20x4 (?) 34,000
End of 20x4 244,000
CI in 20x5 384,000
RGP in 20x5 (?) 100,000
5. b P1,200,000
x (P7,200,000 P4,800,000) = P600,000.
P4,800,000
7. a
20x4
Contract Price P4,800,000
x: Percentage-of-completion _______75%
Recognized Revenue to date P3,600,000
Less: Costs incurred to date P3,400,000
Gross Profit to date P 200,000
Less: GP in prior year _______-0-
Gross profit in current year P 200,000
8. a P3,600,000
x (P8,400,000 P6,000,000) = P1,440,000.
P6,000,000
Items 10 and 11
Number identified is 5, the answer is (a)
a [P1,950,000 (P1,950,000 + P1,300,000)] P2,250,000 = P1,350,000
(P5,500,000 P3,350,000) P1,350,000 = P800,000.
11. a - Gross profit is recognized in the year of sale, 20x4; therefore, in 20x6 no gross profit
should be realized.
12. c P600,000
x (P1,500,000 P1,000,000) = P300,000
P600,000 + P400,000
14. b
20x4: Cost to date P7,500,000 x 20%
P1,500,000
20x5: Cost to date P8,000,000 x 60%
4,800,000
Cost incurred during 20x5 P3,300,000
16. b
Costs Incurred 50,000
Contract price. P260,000
Cost incurred each year.. P 50,000
Add: Cost incurred in prior year. -0-
Costs incurred to date.. P 50,000
Add: Estimated costs to complete 150,000
Total estimated costs. P200,000
Estimated gross profit (loss).. P60,000)
Multiplied by: percentage of completion.. __50/200 15,000
Construction In Progress account 65,000
Less: Progress billings 30,000
Construction In Progress account (net) or Due from customers 35,000
17. d - P2,040,000 P980,000 = P1,060,000 (revenue limited to costs incurred since cost-
recovery method must be used).
18. a - P2,040,000 (P1,000,000 + P1,000,000) = P40,000.
19. c - (P1,000,000 + P1,000,000) (P648,000 + P1,280,000) = P72,000.
20. d
21. d
Recognized gross profit (loss) to date.. P( 100,000)
Less: Recognized gross profit in prior ____20,000
years.
Recognized gross profit each year.. P (120,000)
23. c
Prior year Current year
Contract price. P7,000,00 P7,000,000
0
Cost incurred each year..
Add: Cost incurred in prior year.
Costs incurred to date.. P5,000,000
Add: Estimated costs to complete 2,800,000
Total estimated costs. P7,800,000
Estimated gross profit (loss). (P 800,000)
.
Multiplied by: percentage of completion.. _____100%
Recognized gross profit (loss) to date.. P600,000 (P 800,000)
Less: Recognized gross profit in prior ___600,000
years.
Recognized gross profit each year.. (P1,400,000)
P240,000
x (P2,400,000 Total estimated cost) = P60,000
Total estimated cost
40. a
Under PFRS, the excess of Construction In Progress amounting to P2,100,000
(P2,250,000 P150,000, loss) P1,900,000, billings = P200,000 is classified as due from
customers.
41. c
Costs of construction 1,200,000
Construction in progress 800,000
Revenue for long-term contracts 2,000,000
Percentage complete = P1,200,000 / (P1,200,000 +P600,000) = 2/3
Revenue recognized = 2/3 P3,000,000 = P2,000,000
Cost recognized = P1,200,000
Gross profit recognized = P2,000,000 P1,200,000 = P800,000
42. a
Costs of construction P1,200,000
Profit 800,000
Construction In Progress P2,000,000
Less: Progress billings 1,500,000
Excess (Due from customers) P 500,000
43. b
Costs of construction 600,000
Construction in progress 400,000
Revenue for long-term contracts 1,000,000
Total revenue P3,000,000 revenue previously recognized P2,000,000 = Revenue to
recognize this year P1,000,000.
Cost recognized = P600,000
Gross profit recognized = P1,000,000 P600,000 = P400,000
44. d
Costs of construction 1,200,000
1,2000,00
Revenue for long-term contracts 0
Under cost recovery method, revenue should be recognized up to the extent of costs
incurred.
45. b
Costs of construction P1,200,000
Profit 0
Construction In Progress P1,200,000
Less: Progress billings 1,500,000
Excess (Due to customers) P( 300,000)
46. d
Costs of construction 600,000
Construction in progress 1,200,000
Revenue for long-term contracts 1,800,000
Under the cost recovery method, record equal amounts of revenue and cost until cost
recovered, and then record gross profit. In 20x4, recorded revenue and cost of
P1,200,000, so record remaining cost of P600,000 and all gross profit of P1,200,000 in
20x5.
47. a
20x4 20x5
Contract price P 9,600,000 P10,080,00
4,680,000 5,280,000
CI 3,720,000 480,000 loss 3,420,000
7,920,000 8,700,000
due to customers
P780,000
Note: If there is an anticipated loss, the Construction-in-Progress for both methods
will exactly be the same in the year the loss was incurred.
48. d
Percentage of Completion: Project 6 Project 7 Project 8
Contract price.. P500,000 P700,000 P250,000
Cost incurred each year. P375,000 P100,000 P100,000
Add: Cost incurred in prior year _________ ________ ________
Costs incurred to date P375,000 P100,000 P100,000
Add: Estimated costs to compute. ________ 400,000 100,000
Total estimated costs. P375,000 P500,000 P200,000
Estimated gross profit P125,000 P200,000 P 50,000
Multiply by: percentage of completion. 100 20 50%
% %
Recognized gross profit to date P125,000 P 40,000 P 25,000
Less: Recognized gross profit in prior _________ _________ _________
years
Recognized gross profit each year. P125,000 P 40,000 P 25,000
Cost Recovery Method of Construction Accounting:
Project 6 Project 7 Project 8
Recognized Revenue.... P500,000 P100,000 P100,000
*
Less: Costs of long-term construction
contract.. 100,000 100,000
375,000
Recognized gross profit each year. P125,000 P 0 P 0
* Since the contract is completed then the full amount of P500,000 contract price should be
recognized as revenue.
Percentage of Completion Cost Recovery Method of Construction
Construction in Progress Construction in Progress
Pr. 6 - Cl. 375,000 500,000 Pr. 6 Pr. 6 - Cl. 375,000 500,000 Pr. 6
Pr. 125,000 Pr. 125,000
Pr. 7 Cl. 100,000 Pr. 7 CI 100,000
Pr. 40,000 Pr. 8 CI 100,000
Pr. 8. Cl 100,000 700,000 500,000
Pr. 100,000 12/31 200,000 (d)
765,000 500,000
12/31 (d)
265,000
49. a
Input Measures: Efforts-Expended Method - using timbers laid
Year 2 Year 3
Timers laid Each Year 300 500
Add: Timbers laid in Prior Years 150 450
Timbers laid to date 450 950
Add: Additional support timbers to be laid 520 -0-
Total Estimated Timbers 970 950
Percentage-of-Completion 45/97 100%
x: CONTRACT PRICE P 800,000 P 800,000
Recognized Revenue to Date P 371,134 P 800,000
Recognized Revenue in Prior Years 371,134
Recognized Revenue in Current Yr. P
428,866
Output Measures Number of trail feet
Year 2 Year 3
Trail feet Each Year 7,500 8,000
Add: Trail fees in Prior Years 3,000 10,500
Trail feet to date 10,500 18,500
Add: Additional trail feet to be constructed 8,200 ___-0-
Total Estimated Trail feet 18,700 18,500
Percentage-of-Completion 105/187 100%
x: CONTRACT PRICE P 800,000 P 800,000
Recognized Revenue to Date P 449,198 P 800,000
Recognized Revenue in Prior Years 449,198
Recognized Revenue in Current Yr. P
350,802
50. b
2006 2007 2008
Contract price.. P5,000,00 P5,000,00 P5,000,000
0 0
Cost incurred each year. P2,050,00
0
Add: Cost incurred in prior year 900,000 2,550,000
Costs incurred to date P P2,550,00 P4,600,000
900,000 0
Add: Estimated costs to complete 1,700,00 -0-
0
Total estimated costs. P4,250,00 P4,600,000
0
Estimated gross profit P P 400,000
750,000
Multiply by: percentage of completion. 60 100
% %
Recognized gross profit to date P P P 400,000
100,000 450,000
Less: Recognized gross profit in prior -0- 100,000 450,000
years
Recognized gross profit each year. P P P( 50,000)
100,000 350,000
51. d refer to No. 50
52. c
Contract Price P60,000,000
Less: Total Estimated Costs
Cost Incurred to Date P26,000,000
Add: Estimated Costs to Complete 25,000,000 51,000,000
Estimated Gross Profit. P 9,000,000
Multiplied by: % of completion. 30%
Recognized gross profit to date.. P 2,700,000
Less: RGP in prior years _________0
Recognized gross profit in current year P 2,700,000
Construction-in-progress Account:
Costs incurred to date.. P 26,000,000
GP in the current year 2,700,000
P 28,700,000
Less: Progress billings.. 5,000,000
Due from customer (net). P 23,700,000
53. c
Contract Price P100,000,000
Multiplied by: Gross Profit Rate _________25%
Estimated Gross Profit of the entire contract P 25,000,000
Multiplied by: Percentage of Completion for first year _________50%
Gross Profit realized for current year P 12,500,000
54. c
Contract Price P120,000,000
x: Mobilization Fee
10%
Collection in 20x4 P 12,000,000
Note: Billings for 20x4 will be collected in January 20x5.
55. a
Mobilization Fee: 5% x P10M P 5.0 M
Collection on Billings:
Contract price P 100 M
x: Progress billings, net of 10% and 8% (50% - 10% - 8%) 32%
Progress billings P 32 M
x: Collections net of contract retention of 10% 90% 28.8
M
Collections in 20x4 P 33.8 M
THEORIES
1 False 6. False 11. False 16. True 21 True 26. True 31 False
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2 True 7. False 12. True 17. False 22 False 27. True 32 False
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3 True 8. False 13. False 18. True 23 False 28. False 33 True
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4 False 9. True 14. True 19. False 24 False 29. False 34 False
. . .
5 False 10 False 15, False 20. True 25 False 30. True 35 True
. , . .
36. False
37 True
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38 True
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39 False
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40 False
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