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
2009
P 450,00
1,100,000
Total cost
Total gross profit
Recognized in 2008
Recognized in 2009
2. Input Measure - Cost Recovery Method
2008: (all costs not yet recovered)
2009:
Contract price
Costs incurred:
2008
2009
Total cost
Total gross profit
1,550,000
250,000
40,905
P 209,095
P -01,800,00
P 450,000
1,100,000
1,550,000
P 250,000
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
P528,000
_______P528,000
P 126,048
_______P126,048
_358,752
P484,800
P 43,200
26%
20x4
P528,000
__12,000
P540,000
*P244,032
_126,048
*P370,080
_121,920
P492,000
P 48,000
**74%
20x5
P528,000
__12,000
P540,000
P121,920
_370,080
P492,000
_______P492,000
P 48,000
100%
The revenue, expenses (costs) and profit will be recognized in profit or loss as follows:
20x3
Revenue (P528,000 x 26%)
Costs/Expenses (P484,800 x 26%)
Gross Profit (P43,200 x 26%)
To date
P 137,280
126,048
P 11,232
Recognized in
prior years
-
Recognized in
current year
P 137,280
126,048
P 11,232
20x4
Revenue (P540,000 x 74%)
Costs/Expenses (P492,000 x 74%)
Gross Profit (P48,000 x 74%)
To date
P 399,600
_364,080
P 35,520
Recognized in
prior years
P 137,280
_126,048
P
11,232
Recognized in
current year
P 262,320
238,032
P 24,288
20x5
Revenue (P540,000 x 100%)
To date
P 540,000
Recognized in
prior years
P 399,600
Recognized in
current year
P 140,400
_492,000
P 48,000
_364,080
P 35,520
_127,920
P 12,480
Alternatively, the gross profit recognized each year may also be computed as follows:
Contract price:
Initial amount of contract.......
Variation
Total contract price
Costs incurred each year.
Add: Costs incurred in prior years..
Actual costs incurred to date (1)...
Add: Estimated costs to complete
Total estimated costs (3)...
Estimated gross profit
Percentage of completion (1) / (3)...
Gross profit to date.
Less: Gross profit in prior years.
Gross profit in current year -% of completion
Gross profit in current year cost recovery
method
20x3
20x4
P528,000
_______P528,000
P126,048
_______P126,048
_358,752
P484,800
P 43,200
____26%
P 11,232
_______P 11,232
P528,000
__12,000
P540,000
P240,032
_126,048
P370,080
_121,920
P492,000
P 48,000
____74%
P 35,520
___11,232
P 24,288
P528,000
12,000
P540,000
P121,920
_370,080
P492,000
_______P492,000
P 48,000
___100%
P 48,000
__35,520
P 12,480
P 48,000
20x5
126,04
8
20x4
232,03
2
20x5
127,92
0
6,000
126,04
8
6,000
121,92
0
244,03
2
144,00
0
240,00
0
144,00
0
156,00
0
240,00
0
156,00
0
3. To record collections:
Cash.....
Accounts
receivable
4. To recognize Revenue, Costs
and Gross Profit:
Construction
Expenses
Construction in Progress*..
....
Revenue from
Construction......
5. To close Construction In
Progress**
and Progress Billings account:
Progress
billings
120,00
0
228,00
0
120,00
0
126,04
8
192,00
0
228,00
0
238,03
2
11,232
127,92
0
24,288
137,28
0
192,00
0
12,480
262,32
0
140,40
0
540,00
0
Construction In
Progress.
* The term Contract account may alternatively be used.
** If Contract account is used then no entry is required for No. 5.
540,00
0
20x4
P528,000
_______P528,000
P126,048
_______P126,048
____ _?
P
?
20x5
P528,000
__12,000
P540,000
P244,032
_126,048
P370,080
____ _?
P
?
P528,000
__12,000
P540,000
P121,920
_370,080
P492,000
_______P492,000
The revenue, expenses (costs) and profit will be recognized in profit or loss as follows:
20x3
Revenue*
Costs/Expenses
Gross Profit
* equivalent to costs incurred
To date
P 126,048
126,048
P
0
Recognized in
prior years
-
Recognized in
current year
P 126,048
126,048
P
0
20x4
Revenue*
Costs/Expenses
Gross Profit
* equivalent to costs incurred
To date
P 364,080
_364,080
P
0
Recognized in
prior years
P 126,048
126,048
P
0
Recognized in
current year
P 238,032
238,032
P
0
20x5
To date
Recognized in
prior years
Recognized in
current year
P 540,000
P 364,080
_492,000
364,080
127,920
P 48,000
P 48,000
P 175,200
Alternatively, the gross profit recognized each year may also be computed as follows:
Contract price:
Initial amount of contract.......
Variation
Total contract price
Costs incurred each year.
Add: Costs incurred in prior years..
Actual costs incurred to date ....
Add: Estimated costs to complete
Total estimated costs ....
Estimated gross profit.
Percentage of completion..
Gross profit to date.
Less: Gross profit in prior years.
Gross profit in current year...
20x3
20x4
P528,000
_______P528,000
P 126,048
_______P 126,048
____ _?
P
?
P
0
_
-___
P
0
_______P
0
P528,000
__12,000
P540,000
P244,032
_126,048
P370,080
____ _?
P
?
P
0
_
-___
P
0
_______P
0
20x5
P528,000
12,000
P540,000
P 121,920
_370,080
P492,000
_______P492,000
P 48,000
___100%
P 48,000
__
0
P 48,000
20x3
20x4
20x5
126,04
8
238,03
2
127,92
0
6,000
126,04
8
6,000
121,92
0
244,03
2
144,00
0
240,00
0
144,00
0
156,00
0
240,00
0
156,00
0
3. To record collections:
Cash.....
Accounts
receivable
4. To recognize Revenue, Costs
and Gross Profit:
Construction
Expenses
Construction in Progress*..
....
Revenue from
Construction......
120,00
0
228,00
0
120,00
0
126,48
0
192,00
0
228,00
0
238,03
2
127,92
0
48,000
126,48
0
238,03
2
5. To close Construction In
Progress**
and Progress Billings account:
Progress
billings
Construction In
Progress.
* 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
Less: Construction In Progress.
Gross
amount
due
to
customers
Construction In Progress
20x3
P 24,000
20x4
P 36,000
540,00
0
20x5
P
P399,600
_384,000
P 15,600
P
6,000
P144,000
_137,280
P
175,92
0
540,00
0
192,00
0
6,720
Progress Billings
20x3 CI 126,048
Pr
11,232
144,000 20x3
end of x3 137,280
20x4 CI 238,032
Pr
11,232
144,000 end of x3
240,000 20x4
end of x4 399,600
20x5 CI 127,920
Pr
12,480
384,000 end of x4
156,000 20x5
540,000
540,000
540,000
540,000
Current Liability:
Payables (Payments on Account)
Progress billings
Less: Construction In Progress.
Gross
amount
due
to
customers
20x3
P 24,000
20x4
P 36,000
P
6,000
P 137,280
_144,000
P384,000
_364,080
6,720
Construction In Progress
20x5
P
P 19,920
Progress Billings
20x3 CI 126,048
Pr
0
144,000 20x3
end of x3 126,048
20x4 CI 238,032
Pr
0
144,000 end of x3
240,000 20x4
end of x4 364,080
20x5 CI 127,920
Pr
48,000
384,000 end of x4
156,000 20x5
540,000
540,000
540,000
540,000
3. Gross Profit
a. Input Measure - Percentage of Completion Method (refer to requirement 1
for detailed computation)
Revenue
Less: Costs / Expenses...
Gross Profit.
20x3
P 137,280
_126,048
P
11,232
20x4
P 262,320
_238,032
20x5
P 140,400
_127,920
P 24,288
P 12,480
20x3
P 126,048
_126,048
P
0
20x4
P 238,032
_238,032
P
0
20x5
P 175,920
_127,920
P 48,000
Problem IV
1. Anticipated/Gross Loss
a. Input Measure Percentage of Completion (Cost-to-Cost Method)
2008:
Contract price
Actual cost to date
P2,500,000
P1,500,00
0
1,200,000
2,700,000
P
(200,000)
2009:
Contract price
Costs incurred:
P
2,500,000
In 2008
In 2008
Total cost
Total loss
Recognized in 2008
Recognized in 2009
Measure Cost Recovery Method
Loss in 20x4
Loss in 20x5
a.
Input
P1,500,00
0
1,300,000
2,800,000
P
(300,000)
(200,000)
P
(100,000)
P( 200,000)
P (100,000)
2. Journal Entries
a. Input Measure Percentage of Completion (Cost-to-Cost Method)
2008:
Construction in progress
Various credits
1,500,000
1,500,000
Accounts receivable
Billings on construction contract
1,200,000
Cash
Accounts receivable
1,000,000
Cost of construction
Construction in progress (loss)
Revenue from long-term contracts*
2009:
Construction in progress
Various credits
1,588,889
Accounts receivable
Billings on construction contract
1,300,000
Cash
1,500,000
Accounts receivable
Cost of construction
Construction in progress (loss)
Revenue from long-term
contracts**
Billings on construction contract
Construction in progress
(P1,500,000/P2,700,000)
** P2,500,000
1,388,889
1,200,000
1,000,000
1,300,000
200,000
1,388,889
1,300,000
1,300,000
1,500,000
1,211,111
100,000
1,111,111
2,500,000
2,500,000
*P2,500,000
Problem V
Item to compute
Total revenue recognized during 2009 (w):
CIP contains cost + gross profit = revenue, so w = P50
Gross profit recognized during 2009 (x): P50 P35 = P15
Billings on construction (y) : P14 + P 46 = P60
Net billings in excess of construction in progress (z): Billings of P60
CIP of P50
Calculate the percentage of PAC that was completed during 2009:
50/150 = 33.33%
Problem VI
Item to compute
Cash collected by KP on Cincy One during 2009. (P75 billings P10
A/R)
Actual costs incurred by KP on Cincy One during 2009 (P66 CIP P22
gross pofit)
At 12/31/2009, the estimated remaining costs to complete Cincy One
(44/{44 + x})(300 {44 + x}) = 22; x = 156
Answer
P50 million
P 15
million
P60million
P10 million
333.33%
Answer
P65 million
P44 million
P156
million
22%
P562,000
150,500
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
Contract price ...................
P250,000
P250,000
Current year costs ...............
110,000
120,000
Costs to date ....................
110,000
230,000
Estimated cost to complete .......
100,000
20,000
Estimated total cost .............
210,000
245,000
Estimated total gross profit .....
40,000
5,000
Percent complete .................
52%
94%
Revenue to date ..................
P130,000
P230,000
20x6
P250,000
15,000
245,000
0
240,000
5,000
100%
P250,000
20x4:
Revenue
Costs (110/210 x 210)
Gross profit
To Date
at Dec. 31
P130,000
110,000
P 20,000
20x5:
Revenue
Costs (230/245 x 245)
Gross profit (loss)
P235,000
230,000
P 5,000
P130,000
110,000
P 20,000
P105,000
120,000
P(15,000)
20x6:
Revenue
Costs
Gross profit
P250,000
245,000
P 5,000
P235,000
230,000
P 5,000
P 15,000
15,000
P
0
1.
2.
3.
4.
5.
20x4
P130,000
20,000
Previous
Years
Current
Year
P130,000
110,000
P 20,000
20x5
P100,000
20x6
P15,000
(15,000)
130,000
235,000
125,000
5,000
250,000
(15,000)
0
0
20x5
20x6
1.
2.
3.
4.
5.
P110,000
P120,000
P20,000
5,000
110,000
230,000
125,000
(15,000)
250,000
(20,000)
0
0
Problem IX
1. Percentage of Completion Method (Cost-to-cost Approach)
Contract price
Current year costs
Costs to date
Estimated cost to complete
Estimated total cost
Estimated total gross profit
Percent complete
2005
P250,000
150,000
150,000
90,000
240,000
10,000
63%
2006
P250,000
100,000
250,000
20,000
270,000
(20,000)
93%
2007
P250,000
15,000
265,000
0
265,000
(15,000)
100%
Revenue to date
P157,500
P232,500
P250,000
2005:
Revenue ............
Costs (150/240 x 240)
Gross profit ............
To Date
at Dec. 31
P157,500
150,000
P 7,500
2006:
Revenue ............
Costs ............
Gross profit (loss) ............
P232,500
252,500
P(20,000)
P157,500
150,000
P 7,500
P 75,000
102,500
P(27,500)
2007:
Revenue ............
Costs ............
Gross profit (loss) ............
P250,000
265,000
P(15,000)
P232,500
252,500
$(20,000)
P 17,500
12,500
P 5,000
20x4
20x5
20x6
P150,000
7,500
157,500
Previous
Years
Current
Year
P157,500
150,000
P 7,500
P102,500
(27,500)
230,000*
110,00
0
47,50
0
230,00
0
0
10,000
10,000
P12,500
5,000
0
0
0
*P150,000 + 7,500 + 157,500 + 100,000 costs incurred during the year 27,500
loss
2. Cost Recovery Method
1. Construction costs (expense)
recognized during the year
2. Gross profit recognized during
the year
3. Balance in the construction in
progress account at Dec. 31
(after closing entries)
4. Balance in the progress
billings account at Dec. 31 .
5. NNet (3-4) or (4-3) due from (due to)
20x4
P150,000
0
20x5
20x6
P 80,000*
P20,000**
(20,000)
5,000
150,000
***230,000
110,00
0
40,00
0
230,00
0
0
0
0
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
(P3,300,000 P2,010,000) P810,000 = P480,000.
4. b
5.
P1,200,000
x (P7,200,000 P4,800,000) = P600,000.
P4,800,000
P7,200,000 P4,875,000 =P2,325,000.
6.
a
20x4
P4,800,000
_______75%
P3,600,000
P3,400,000
P 200,000
_______-0P 200,000
Contract Price
x: Percentage-of-completion
Recognized Revenue to date
Less: Costs incurred to date
Gross Profit to date
Less: GP in prior year
Gross profit in current year
7.
8.
9.
10. c
P3,600,000
x (P8,400,000 P6,000,000) = P1,440,000.
P6,000,000
P8,400,000 P5,600,000 = P2,800,000.
a
11. a - Gross profit is recognized in the year of sale, 20x4; therefore, in 20x6 no gross profit
should be realized.
12. a
Contract Price
Less: Total Estimated Costs
Costs Incurred-1/10/x4 to 12/31/x5
Add: Estimated costs to complete
Less: Costs incurred to date
Multiplied by: % of completion
Gross Profit to date
Less: GP in prior year (given)
Gross profit in current year
P6,000,000
P3,600,000
1,200,000
4,800,000
P1,200,000
___3.6/4.8
P 900,000
___600,000
P 300,000
13. b
15. d
16. b
17. c
18. b
P3,300,000
19. c
20. c
P600,000
x (P1,500,000 P1,000,000) = P300,000
P600,000 + P400,000
(P1,500,000 P1,050,000) P300,000 = P150,000.
21.
22.
23.
24.
25. c
26. a
27. d - P85M costs incurred in 2011 = revenue recognized in 2011. Under the costs recovery
(zero-profit approach) of construction accounting, revenue is recognized up to the
extent of costs incurred as long as it is probable will be recoverable.
28.
29.
30. No answer available. 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.
Under the US FASB, the excess of P200,00 is considered as an inventory account.
31. b
(P9,600,000 45%)
(P9,000,000 15%)
= P2,970,000.
32. 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
End of 20x5
33. d
728,000
34. c
Costs of construction
Construction in progress
Revenue for long-term contracts
1,200,000
800,000
2,000,000
P1,200,000
800,000
P2,000,000
1,500,000
P 500,000
36. b
Costs of construction
Construction in progress
Revenue for long-term contracts
600,000
400,000
1,000,000
1,200,000
1,2000,00
0
Under cost recovery method, revenue should be recognized up to the extent of costs
incurred.
38. b
Costs of construction
Profit
Construction In Progress
Less: Progress billings
Excess (Due to customers)
P1,200,000
0
P1,200,000
1,500,000
P( 300,000)
39. d
Costs of construction
Construction in progress
Revenue for long-term contracts
600,000
1,200,000
1,800,000
Under the cost recovery method, record equal amounts of revenue and cost until cost
recovered, and then record gross profit. In 2008, recorded revenue and cost of
P1,200,000, so record remaining cost of P600,000 and all gross profit of P1,200,000 in
2009.
40. a
20x4
20x5
Contract price
P 9,600,000
P10,080,00
P 4,920,000
4,920,000
P 9,840,000
P
8,640,000
2,160,000
P
10,800,000
P
(720,000)
100%
P (720,000)
P(240,000
)
100%
P
(240,000)
_________
P
(240,000)
(240,000)
P
(480,000)
Progress Billings
CI
4,920,000
240,000 loss
5,280,000
CI
4,680,000
3,720,000
480,000 loss
5,280,000
3,420,000
7,920,000
8,700,000
due to customers
P780,000
Year 3
500
450
950
-0950
100%
P 800,000
P 800,000
371,134
P
428,866
Year 2
7,500
3,000
10,500
8,200
18,700
105/187
P 800,000
P 449,198
Year 3
8,000
10,500
18,500
___-018,500
100%
P 800,000
P 800,000
449,198
P
350,802
42. d
Percentage of Completion:
Contract price..
Cost incurred each year.
Add: Cost incurred in prior year
Costs incurred to date
Add: Estimated costs to compute.
Total estimated costs.
Estimated gross profit
Multiply by: percentage of completion.
Recognized gross profit to date
Less: Recognized gross profit in prior
years
Recognized gross profit each year.
Project 6
P500,000
P375,000
_________
P375,000
________
P375,000
P125,000
100
%
P125,000
_________
Project 7
P700,000
P100,000
________
P100,000
400,000
P500,000
P200,000
20
%
P 40,000
_________
Project 8
P250,000
P100,000
________
P100,000
100,000
P200,000
P 50,000
50%
P125,000
P 40,000
P 25,000
Project 7
P100,000
Project 8
P100,000
100,000
100,000
P 25,000
_________
Recognized Revenue....
Less: Costs of long-term construction
contract..
Recognized gross profit each year.
Project 6
P500,000
*
375,000
P125,000
* Since the contract is completed then the full amount of P500,000 contract price should be
recognized as revenue.
Percentage of Completion
Construction in Progress
Pr. 6 - Cl. 500,000 Pr. 6
375,000 Pr.
125,000
Pr. 7 Cl.
100,000
Pr.
40,000
Pr. 8. Cl
100,000
Pr.
100,000
765,000 500,000
12/31
(d)
265,000
43. b
Contract price..
Cost incurred each year.
2006
P5,000,00
0
2007
P5,000,00
0
2008
P5,000,000
P2,050,00
0
2,550,000
P4,600,000
P
100,000
-0-
900,000
P2,550,00
0
1,700,00
0
P4,250,00
0
P
750,000
60
%
P
450,000
100,000
P
100,000
P
350,000
P( 50,000)
P
900,000
-0P4,600,000
P 400,000
100
%
P 400,000
450,000
d refer to No. 43
c refer to No. 18
d refer to No. 19
c
Contract price.
Cost incurred each year..
Add: Cost incurred in prior year.
Costs incurred to date..
Add: Estimated costs to complete
Total estimated costs.
Estimated gross profit (loss).
.
Multiply by: percentage of completion..
Recognized gross profit (loss) to date..
Less: Recognized gross profit in prior
years.
Recognized gross profit each year..
Prior year
P7,000,00
0
Current year
P7,000,000
P5,000,000
2,800,000
P7,800,000
(P 800,000)
P600,000
_____100%
(P 800,000)
___600,000
(P1,400,000)
48. 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..
GP in the current year
Less: Progress billings..
P 26,000,000
2,700,000
P 28,700,000
5,000,000
P 23,700,000
49. c
Contract Price
Multiplied by: Gross Profit Rate
Estimated Gross Profit of the entire contract
Multiplied by: Percentage of Completion for first year
Gross Profit realized for current year
P100,000,000
_________25%
P 25,000,000
_________50%
P 12,500,000
50. c
10%
51. a
Contract Price
x: Mobilization Fee
P120,000,000
Collection in 20x4
Note: Billings for 20x4 will be collected in January 20x5.
P 12,000,000
P 33.8 M
.
3
.
4
.
5
.
6.
False
11.
False
16.
True
21
.
True
26.
31
.
7. False
12
.
13
.
14
.
15
,
True
17
.
18
.
19
.
20
.
False
22
.
23
.
24
.
25
.
False
27
.
28
.
29
.
30
.
32
.
33
.
34
.
35
.
True
8. False
False
9. True
False
10 False
,
36.
41.
37
.
38
.
39
.
40
.
42
.
43
.
44
.
45
.
a
c
d
d
c
False
True
False
True
False
True
False
False
b
c
b
a
b
d
c