Long-Term Construction Contracts

Long-Term Construction Contracts
181
CHAPTER 10
MULTIPLE CHOICE ANSWERS AND SOLUTIONS
10-1:
a
Percentage of Completion Method:
Contract Price
Less:Total estimated cost
Cost incurred
Estimated remaining cost
Gross profit estimated
% of completion (200,000/600,000)
Gross profit to be recognized
Zero Profit Method:
10-2:
10-4:
10-5:
10-6:
P 200,000
_400,000
__600,000
400,000
__33 1/3%
P 133,333
0
a P100,000
Contract Price
Less: Total estimated cost
Estimated gross profit
% of completion:
2007 (3,900,000/7,800,000)
2008(6,300,000/8,100,000)
Gross profit earned to date
Less: Gross profit earned in prior year
Gross profit earned each year
10-3:
P1,000,000
2007
2008
P9,000,000 P9,000,000
_7,800,000 _8,100,000
1,200,000
900,000
50%
_________ ______78%
600,000
700,000
________ ___600,000
P 600,000 P 100,000
a
Contract Price
Less: Total estimated cost (3,600,000 + 1,200,000)
% of completion (3,600,000/4,800,000)
Less: Gross profit earned in 2007
Gross profit earned in 2008
P6,000,000
_4,800,000
1,200,000
_____75%
900,000
__600,000
P 300,000
b
Contract Price
Less: Total estimated cost (930,000 + 2,170,000)
Loss
P3,000,000
_3,100,000
(P 100,000)
b
Total cost to date, 2011 (4,800,000 X 60%)
Less: Cost incurred in 2010 (4,500,000 X 20%)
Cost incurred in 2011
P2,880,000
__900,000
P1,980,000
a
Contract Price
Less: Total estimated cost (900,000/1,800,000)
% of completion (900,000/2,700,000)
Gross profit recognized, 2010
Add: Cost Incurred
Construction in Progress - 2010
P3,000,000
_2,700,000
300,000
___33.33%
100,000
___900,000
P 1,000,000
Zero Profit Method:

Cost incurred to Construction in Progress - 2010
P 900,000
10-7:
a
Contract Price
% of completion
Gross Profit earned to date
Gross Profit earned in prior year
Gross Profit earned this year
10-8:
b
Collections:
Contract Billings
Less: Accounts receivable
Collections
Initial Gross Profit:
Contract Price
Gross Profit rate:
Income recognized
Divide by Construction in Progress
Initial Gross Profit
10-9:
2010
2011
P4,200,000 P4,200,000
_3,000,000 _3,750,000
1,200,000
450,000
_____20% ____100%
240,000
450,000
_______ __240,000
P 240,000 P 210,000
P 47,000
___15,000
P 32,000
P 800,000
10,000
50,000 =_____20%
P 160,000
a
Gross profit (loss) earned in 2011
Gross profit earned in prior years
Gross profit earned to date - 2011
Divide by percentage of completion - 2011
Estimated gross profit - 2011
Less: Contract price
Total estimated cost
Less: Cost incurred - 2011
Cost incurred to date - 2010
Less: Cost incurred - 2009
(P 20,000)
_180,000
160,000
___100%
160,000
2,000,000
1,840,000
_820,000
1,020,000
__360,000
P 660,000
10-10: b
Gross profit earned to date - 2010 (P40,000 + P140,000)
Divide by estimated gross profit - 2010:
Contract price
P2,000,000
Gross profit rate [180,000/(1,020,000 + 180,000)]
___X 15%
Percentage of completion - 2010
P 180,000
__300,000
60%
10-11: a, Refer to Q 10-10 solutions.

10-12: d
Contract price
Estimated gross profit - 2010 (Refer to Q 10-10)
Less: Cost incurred to date - 2010 (refer to Q 10-9)
Estimated cost to complete - 2010
P2,000,000
__300,000
1,700,000
1,020,000
P 680,000
10-13: d
2010: Construction in progress
Less: Construction costs
Gross profit recognized - 2010
P 244,000
__210,000
P 34,000
2011:
P 484,000
Construction in progress (P728,000-P244,000)
Less: Construction costs

Gross profit recognized - 2011
10-14:
__384,000
P 100,000
d
Project 1
Contract price
Cost incurred to date - 2011
Estimated cost to complete
Total
Estimated gross profit (Loss)
Percentage of completion
Profit (loss) to be recognized
Total is (P10,000)
Project 2
P 420,000 P 300,000
P 240,000 P 280,000
__120,000 ___70,000
__360,000 __350,000
60,000 (50,000)
__66.67% _______
P 40,000 (P 50,000)
Zero Profit Method - The loss (P50,000) for project 2 only.

10-15: a
2009
2010
2011
P3,744,000 P3,744,000 P3,744,000
Contract price (cost X 120%)

Less: Total estimated costs
(1) Cost incurred to date
(2) Total
Percentage of completion (1 2)
Gross profit earned this year
546,000 1,544,400 3,120,000

_2,054,000 _1,315,000 ________
_2,600,000 _2,860,000 _3,120,000
1,144,000
884,000
624,000
_____20% _____54% ____100%
240,240
477,360
624,000
_______ __240,240 __477,360
P 240,240 P 237,120 P 146,640
10-16: d
10-17:
2010
2011
P6,300,000 P6,300,000
Contract price
Cost incurred to date
Total
Percentage of completion:
2010 (1,425,000 - 50,000) 5,500,000
2011 (3,040,000 - 50,000) 5,000,000
Profit earned to date
25%
________ __59.80%
200,000
777,400
________ __200,000
P 200,000 P 577,400
a
Cash collections:
Progress billings
Less: Accounts receivable, end
Collection
P1,500,000
__500,000
P1,000,000
Cost incurred to date:

Construction in Progress
Less: Gross profit earned
10-18: d
Contract price
Less: Total Estimated Costs
1,425,000
_4,075,000
P5,500,000
800,000
3,040,000
_1,960,000
P5,000,000
1,300,000
P1,600,000
__200,000
P1,400,000
Apartment A
2010
2011
1,620,000 1,620,000
Apartment B
2010
2011
2,520,000 2,520,000
(1)

(2)
Estimated Gross Profit
Less: Gross profit earned in Prior years
Total Gross Profit 20 11 (P75,000 + P22,800)
P 600,000 P1,200,000 P1,560,000 P2,310,000

840,000
240,000
690,000
1,440,000 1,440,000 2,250,000 2,310,000

180,000
180,000
270,000
210,000
_41.67%
_83.33%
_69.33% _100.00%
75,000
150,000
187,200
210,000
_______ ___75,000 _______ __187,200
P 75,000 P 75,000 P 187,000 P 22,800
P97,800
Zero Profit Method : P210,000 gross profit earned in 2011 for Apartment B.
10-19: d
2010
Contract price:
2010
2011 (P6,000,000-P50,000)
(2) Total estimated cost
Less: Gross profit earned in Prior year
10-20:
2011
P6,000,000
_________ P5,950,000
2,340,000
260,000
2,600,000
3,400,000
____90%
3,060,000
_______
P3,060,000
2,650,000
2,650,000
3,300,000
___100%
3,300,000
3,060,000
P 240,000
a
(1)Cost incurred to date
(2)Estimated cost to complete
(3)Total Estimated Costs
2009
P3,400,000
1,600,000
5,000,000
Contract price
Gross profit earned (loss) to date
Add: Cost incurred to date
Construction in Progress
Less: Contract billings
Balance
68%
2010
2011
P5,950,000 P6,150,000
150,000
6,100,000
6,150,000
98%
100%
P6,000,000 P6,000,000 P6,000,000

5,000,000
6,100,000
6,150,000
1,000,000
(100,000) (150,000)
68%
100%
100%
680,000
(100,000) (150,000)
3,400,000
5,950,000
6,150,000
4,080,000
5,850,000 6,000,000
3,200,000
5,200,000
6,000,000
P 880,000
P 650,000
10-21: d
Construction in Progress:
Cost incurred to date, 2010
Gross profit (loss), 2010 (Schedule 1)
Less: Contract billings, 2009 (P3,250,000 x 75%)
P2,625,000
(125,000) P2,500,000
2,437,500
Excess of Construction in Progress over Contract Billings (CA)
P 62,500
Schedule 1 Computation of gross profit earned:

Contract price
Total estimated cost:
Cost to date
Total
2009
2010
P3,250,000 P3,250,000
1,075,000
1,612,500
2,625,000
750,000
2,687,500
3,375,000
Estimated gross profit (loss)

% of completion
562,500
40%
(125,000)
Gross profit (loss) to date

225,000
(125,000)
225,000
P 225,000 P(350,000)
10-22: b
2008
2009
P2,800,000 P2,800,000
Contract price
Estimated cost:
Cost to date
Estimated costs to complete
1,300,000
1,360,000
Total
2,660,000

% of completion
RGP to date
RGP in prior years
RGP each year
10-23:
1,960,000
780,000
2,740,000
140,000
48.87%
68,418
68,418
60,000
71.53%
42,918
68,418
(25,500)
2010
P2,800,000
2,440,000
380,000
2,820,000
(20,000)
(20,000)
42,918
(62,918)
a
2010
Contract price
Estimated costs:
Cost to date
Total
Project A
P2,900,000
Project B
P3,400,000
Project C
P 1,700,000
1,680,000
1,120,000
1,440,000
1,760,000
320,000
960,000
2,800,000
3,200,000
1,280,000

% of completion
100,000
60%
200,000
45%
420,000
25%
Gross profit earned this year (P255,000)
P 60,000
P 90,000
P 105,000
Project B
P3,400,000
Project C
P1,700,000
Project D
P 2,000,000
2,120,000
0
1,183,000
1,360,000
560,000
117,000
1,040,000
2,640,000
3,480,000
1,300,000
1,600,000
2011
Contract price
Estimated costs
Cost to date2,640,000
Total
Project A
P2,900,000

% of completion
260,000
100%

Gross profit earned in prior year
260,000
60,000
Gross profit earned this year(P429,000)

P 140,000
P 200,000
(80,000)
400,000
91%
400,000
35%
(80,000)
364,000
90,000
105,000
140,000
0
P(170,000)
Gross profit earned

General and administrative expenses
Net income
2010
P 255,000
120,000
2011
P 429,000
120,000
P 135,000
P 309,000
10-24: c
Contract price
Gross profit earned to date, 2008 (P900,000 P100,000)
Total cost to date, 2011
Less: cost incurred in 2011
P10,000,000
800,000
9,200,000
4,100,000
Cost to date, 2010
P 5,100,000

Divided by % of completion:
(P5,100,000 + P900,000) / P10,000,000
P 900,000
Estimated gross profit, 2107
P 1,500,000
60%
10-25: d
Construction in progress:
Gross profit earned to date (P2,500,000 P2,000,000)
Total
Less: Contract billings (P2,500,000 x 30%)
Excess of contract billings over construction in progress (CL)
P 440,000
110,000
550,000
750,000
P( 200,000)
10-26:
10-27:
a
Contract price
Cost incurred to date:
Site labor cost
Cost of construction materials
Depreciation of special plant & equip
Total
Percentage of completion (45/100)
Gross profit to be recognized
P120,000,000
10,000,000
30,000,000
5,000,000
45,000,000
55,000,000
a
Cost incurred to date- 2010
Total estimated cost (8,000,000 / 40%)
20,000,000
8,000,000
100,000,000
20,000,000
45%
P 9,000,000
P12,000,000
3,700,000
3,700,000

Estimated cost at completion- 2009
Total estimated cost- 2009
8,300,000
12,450,000
P20,750,000
Percentage of completion- 2009 (8,300,000/ 20,750,000) = 40%

10-28:
a
2010
Contract price
Gross profit recognized
Contract 1
P600,000
Contract 2
P450,000
150,000
150,000
300,000
300,000
50%
P150,000
87,500
162,500
250,000
200,000
35%
P70,000
2011
Contract price
Gross profit earned in 2007
Contract 1
600,000
350,000
250,000
80%
200,000
150,000
50,000
Contract 2
450,000
300,000
150,000
60%
90,000
70,000
20,000
Actual cost incurred to date

Gross profit earned to date (P220,000 P214,000)
Construction in Progress, 12/31/011
10-29:
Contract 3
900,000
500,000
400,000
36%
144,000
144,000
P 640,000
434,000
P1,074,000
a
Bicol
Contract price
P875,000
Cost incurred
656,250
Est. cost to complete
656,250
218,750
100%
Gross profit earned
P218,750
Total cost incurred
Total gross profit earned
Construction in progress
Less: Billings
Due from (to)
Davao
Aklan
P1,225,000 P437,500
175,000
700,000
875,000
350,000
20%
P 70,000
1,006,250
332,500
1,338,750
1,312,500
26,250
175,000
175,000
350,000
87,500
50%
P43,750
Total
1,006,250
332,500
Zero Profit
1,006,250
218,750
1,225,000
1,312,500
(87,500)
10-30:
a
Contract price
Cost incurred
Gross profit recognized
10-31:
10-32: 1.
P40,825,000
8,475,000
28,400,000
36,875,000
3,950,000
22.983%
P 907,830
a
Cost of direct materials used
Cost of direct labor, including supervision
Cost of indirect materials used
Depreciation of plant and equipment used on the contract
Payroll of design and technical department
Insurance costs
Costs of contracted research and development activities
General and administrative expenses
Borrowing costs
Total cost incurred to date
P220,000
150,000
55,000
120,000
80,000
60,000
105,000
30,000
130,000
P930,000
Estimated gross profit (P2,950,000 P2,600,000)

% of completion (P930,000 / P2,600,000)
Realized gross profit
P350,000
35.77%
P125,195
a
Project 1
P420,000
180,000
240,000
Contract price
Less total estimated costs
% of completion:
Project 1 (P120,000 / P180,000)
Project 2
Realized gross profit (loss)
Expenses
Net income (loss), Dec. 31, 2011, P120,000
2.
Project 2
P150,000
175,000
(25,000)
66.67%
160,000
10,000
P150,000
100%
(25,000)
5,000
P(30,000)
a, Project 2 only.
10-33: a
Contract price
Total estimated costs
% of completion *
AA
P384,000,000
350,240,000
33,760,000
5%
P1,688,000
BB
P35,000,000
30,552,000
4,448,000
75%
P3,336,000
CC
P175,000,000
143,640,000
31,360,000
75%
P23,520,000
DD
P99,400,000
91,200,000
8,200,000
50%
P4,100,000
* Actual cost incurred / Total estimated cost.
Total realized gross profit

P 32,644,000
Total cost incurred to date
193,756,000
226,400,000
Billings:
Contract signing (P693,400,000 x 20%)
P 138,680,000
AA: P384,000,000 (384,000 x 20%) x 5%
15,360,000
BB: P35,000,000 (35,000,000 x 20%) x 75%
21,000,000
CC: P175,000,000 (P175,000 x 20%) x 75% 105,000,000
DD: P99,400 - (P99,400 x 20%) x 50%
39,760,000 319,800,000
Due to
P 93,400,000
10-34:
b (P1.2 Billion x 10%)
10-35:
Supporting Computation:
2009
2010
2011
Contract price
Reduction due to delay
Net contract price
Less total estimated cost:
Total
% of completion (CITD / TEC)
Realized gross profit to date
Realized gross profit in prior years
Realized gross profit (loss) this year
1.
2.
3.
P6,600,000
P6,600,000
6,600,000
6,600,000
P6,600,000
90,000
5,910,000
1,782,000
3,618,000
5,400,000
5,400,000
33%
396,000
P396,000
3,850,000
1,650,000
5,500,000
5,500,000
70%
770,000
396,000
P374,000
5,500,000
5,500,000
5,500,000
100%
410,000
770,000
P(360,000)
a
Operating expenses
Net income
P374,000
90,000
P284,000
a
Construction in progress (P770,000 + P3,850,000)
Contract billings
Balance
P4,620,000
3,100,000
P1,520,000
a
Contract billings
Balance
P2,850,000
3,100,000
750,000
SOLUTIONS TO PROBLEMS
Problem 10 1
(a)
Contract Price
(2) Total
Estimated gross profit to date
(b)
Contract Price
Less: Total cost incurred
Gross profit
(c)
2010: Construction in Progress

Cost of construction
Construction Revenue
2011: Construction in Progress
Cost of Construction
2010
P 450,000
2011
P 450,000
200,000
__100,000
__300,000
150,000
______2/3
100,000
_______
P 100,000
320,000
_______
_320,000
130,000
___100%
130,000
__100,000
P 30,000
P 450,000
__320,000
P 130,000
100,000
200,000
300,000
30,000
320,000
350,000
Problem 10 2
(a)
(b)
Less: Cost incurred
Gross profit 2011
P1,250,000
_1,250,000
P
0
Construction in Progress (cost incurred)

Less: Contract billings (P5,800,000 x 30%)
Billings in excess of related costs
P1,250,000
_1,740,000
P(490,000)
Contract price
P5,800,000
Less:
Total estimated costs

Percentage of Completion (P1,250,000 500,000)
Gross profit
P1,250,000
3,740,000
Construction on Progress (P1,250,000 + P200,000)

Less: Contract billings
Billings in excess of related costs
(a)
Contract Price
(2) Total
Gross profit earned in prior yr(s)
Gross profit earned the year
5,000,000
800,000
_____25%
P 200,000
P1,450,000
_1,740,000
P(290,000)
Problem 10 3
2008
2009
P55,000,000 P55,000,000
2010
2011
P55,000,000 P55,000,000
15,000,000
_35,000,000
_50,000,000
5,000,000
______30%
1,500,000
________
P 1,500,000
35,000,000
15,000,000
50,000,000
5,000,000
_____70%
3,500,000
_2,500,000
P 1,000,000
(b)
25,000,000
25,000,000
50,000,000
5,000,000
_____50%
2,500,000
_1,500,000
P 1,000,000
2010
(1) Construction in Progress

Cash or Payable
15,000,000
(2) Accounts Receivable

Contract Billings
15,000,000
(3) Cash
Accounts Receivable
12,000,000
(4) Construction in Progress

Cost of Construction
1,000,000
15,000,000
15,000,000
50,000,000
________
50,000,000
5,120,000
____100%
5,000,000
_3,500,000
P 1,500,000
2011
15,000,000
15,000,000
20,000,000
15,000,000
20,000,000
25,000,000
12,000,000
25,000,000
1,500,000
15,000,000
16,000,000
16,500,000
Problem 10 4
(a)
Divide by total estimated cost
Percentage of Completion
(b)
Contract Price
Less: Total Estimated Cost
Total
Less: Gross profit earned in prior yrs.
2009
P 1,000,000
P 9,000,000
11.11%
2010
2011
P 5,500,000 P10,000,000
P11,000,000 _12,000,000
50%
83.33%
2009
P15,000,000
2010
2011
P15,000,000 P15,000,000
1,000,000
__8,000,000
__9,000,000
6,000,000
___11.11%
666,600
________
P 666,600
5,500,000
__5,500,000
_11,000,000
4,000,000
______50%
2000,000
___666,600
P 1,333,400
10,000,000
__2,000,000
_12,000,000
3,000,000
___83.33%
9,500,000
_2,000,000
P 500,000
Problem 10-4, continued:
(c)
(1) Construction in progress (cost incurred)

Cash
1,000,000
(2) Accounts Receivable
1,325,000
1,000,000
Contract Billings
1,325,000
(3) Cash
Accounts Receivable
1,200,000
(4) Construction in progress (gross profit)

666,600
1,000,000
1,200,000
1,666,600
Problem 10 5
(1)
2008
P14,000,000
Contract Price
Less: Total Estimated Cost
6,500,000
__6,800,000
Total
_13,300,000
700,000
___48.87%
342,090
Less: Gross profit (loss) in prior yrs. ________
Gross profit (loss) this year
P 342,090
(2)
2008
2009
P14,000,000
2010
2011
P14,000,000 P14,000,000
9,800,000
_3,900,000
13,700,000
300,000
___71.53%
214,590
___342,090
P( 127,500)
12,200,000
_1,900,000
14,100,000
( 100,000)
_____100%
( 100,000)
___214,590
P( 314,590)
2009
13,900,000
________
13,900,000
100,000
____100%
100,000
( 100,000)
P 200,000
2010
2011
6,500,000
3,300,000
2,400,000
1,700,000
Construction in progress 342,090
127,500
314,590
200,000
6,842,090
3,172,500
2,085,410
1,900,000
Problem 10 6
(1)
Contract Price
Total
Gross profit (loss) in prior yrs.
Gross profit (loss) this year
(2)
(3)
Cash
Accounts Receivable
Contract Billings
2008
P 6,000,000
2009
P 6,000,000
2010
P 6,000,000
3,400,000
_2,100,000
_5,500,000
500,000
___61.82%
309,100
________
P 309,100
5,950,000
___150,000
_6,100,000
( 100,000)
_______
( 100,000)
__309,100
P 409,100
6,150,000
________
_6,150,000
( 150,000)
________
( 150,000)
( 100,000)
P 50,000
2008
2009
3,400,000
2,550,000
309,100
409,100
3,709,100
2,140,900
2010
200,000
400,000
400,000
6,000,000
6,000,000
Problem 10 7
(1)
Contract Price
Less:Total Estimated Cost
Total
2009
P16,000,000
2010
P16,000,000
2011
P16,000,000
4,600,000
__9,640,000
_14,240,000
1,760,000
9,100,000
__5,100,000
_14,200,000
1,800,000
14,350,000
_________
_14,350,000
1,650,000
50,000
150,000
Engineer's estimate of comp.

______31%
Gross profit to date
545,600
Less: Gross profit earned in prior yrs. ________
Gross profit earned this yr.
P 545,600
(2)
(a) Construction on progress
Cash
2009
4,600,000
______58%
1,044,000
__545,600
P 498,410
2010
4,500,000
4,600,000
(b) Accounts receivable

Contract billings
5,000,000
(c) Cash
Accounts receivable
4,500,000
_____100%
1,650,000
_1,044,000
P 606,000
2011
5,250,000
4,500,000
6,000,000
5,000,000
5,250,000
5,000,000
6,000,000
5,400,000
4,500,000
5,000,000
6,100,000
5,400,000
6,100,000
(d) Cost of constructions

4,600,000
4,500,000
5,250,000
545,600
498,400
606,000
Construction revenue
5,145,600
4,998,400
5,856,000
(e) Contract billings
16,000,000
Construction on progress
16,000,000
(3)
Zero Profit Method: 2011 Entries

(a) Construction in progress
Cash / accounts payable
5,250,000
5,250,000
(b) Accounts receivable

Contract billings
5,000,000
5,000,000
Problem 10-7, continued:
(4)
(c) Cash
Accounts receivable
6,100,000
(d) Cost of construction

5,250,000
1,650,000
(e) Contract billings

16,000,000
6,100,000
6,900,000
16,000,000
The following entry would be the only one different from (2).
2009
2010
2011
4,414,400
3,821,600
6,114,000
545,600
498,400
606,000
4,960,000
4,320,000
6,720,000
Total estimated costs x estimated percentage of completion.
(1)
Contract Price
Less:Total Estimated Costs
Total
Less: Gross profit (loss) in prior yrs.
Gross profit (loss) this years
(2)
Problem 10 8
2009
P6,500,000
2010
P6,500,000
2011
P6,500,000
2,150,000
_3,850,000
_6,000,000
500,000
________
P 520,000
5,250,000
_1,500,000
_6,750,000
(250,000)
___520,000
P( 250,000)
6,850,000
________
_6,850,000
(350,000)
_(250,000)
P( 600,000)
In 2011 when the project is completed.
Problem 10-9
1.
2.
P20,000 (P220,000 P200,000)

P260,000 (P250,000 + P10,000)
3.
4.
5.
6.
P370,000 [P850,000 (P220,000 + P260,000)]

P380,000 (P370,000 + PP10,000)
P830,000 (P200,000 + P250,000 + P380,000)
P86,095:
2011: 450/640 = 0.7031 x P850,000 = P597,635
Less cost to date
450,000
Gross profit to date
147,635
2010: 200/650 = 0.3077 x P200,000 =
(61,540)
RGP - 2011
P86,095
Problem 10-10
Building 1
a. Contract price
b. Cost to date
c. ECTC
d. TEC
e. Est. GP
a-d
f. % of comp.
b/d
g. RGP to date
axf
h RGP-prior yr
i RGP this yr
j CITD (b)
k CITD prior yr.
l CITD this yr.
m GP (loss)
Prior
To 2011
P4,000,000
2,070,000
1,380,000
3,450,000
Building 2
2011
P4,000,000
3,000,000
750,000
3,750,000
Prior
To 2011
P9,000,000
6,318,0000
1,782,000
8,100,000
550,000
250,000
60%
2,400,000
2,400,000
2,070,000
2,070,000
P330,000
Building 3
Bldg. 4
2011
P9,000,000
8,118,000
9,118,000
Prior
To 2011
P13,150,000
3,000,000
9,000,000
12,000,000
2011
P13,150,000
10,400,000
2,800,000
13,200,000
2011
P2,500,000
800,000
1,200,000
2,000,000
900,000
882,000
1,150,000
(50,000)
500,000
80%
78%
100%
25%
78.79%
40%
3,200,000
2,400,000
800,000
3,000,000
2,070,000
930,000
P(130,000)
7,020,000
7,020,000
6,318,000
6,318,000
P702,000
9,000,000
7,020,000
1,980,000
8,118,000
6,318,000
1,800,000
P180,000
3,287,500
3,287,500
3,000,000
3,000,000
P287,500
10,360,885
3,287,500
7,073,385
10,410,885*
3,000,000
7,410,885
P(337,500)
1,000,000
1,000,000
800,000
800,000
P200,000
*P10,360,885 + P50,000 = P10,410,885
1
Total revenue all buildings
Total costs all buildings
Total gross profit all buildings
2.
Revenue Building 2
Cost Building 2
Gross profit
Less anticipated loss on Building 3
Gross profit
Prior to 2011
P12,707,500
11,388,000
P1,319,500
2011
P10,853,385
10,940,885
P (87,500)
P9,000,000
8,118,000
P 882,000
( 50,000)
P 832,000

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Long-Term Construction Contracts

Zero Profit Method:

10-11: a, Refer to Q 10-10 solutions.

Construction in progress (P728,000-P244,000)

Less: Construction costs

Zero Profit Method - The loss (P50,000) for project 2 only.

Contract price (cost X 120%)

546,000 1,544,400 3,120,000

Cost incurred to date:

Cost incurred to date

P 600,000 P1,200,000 P1,560,000 P2,310,000

1,440,000 1,440,000 2,250,000 2,310,000

P6,000,000 P6,000,000 P6,000,000

Excess of Construction in Progress over Contract Billings (CA)

Schedule 1 Computation of gross profit earned:

Estimated gross profit (loss)

Gross profit (loss) to date

Gross profit earned this year

Estimated gross profit

Estimated gross profit

Gross profit earned this year (P255,000)

Estimated gross profit (loss)

Gross profit (loss) to date

Gross profit earned this year(P429,000)

Gross profit earned

Cost to date, 2010

Gross profit earned to date

Estimated gross profit, 2107

Cost incurred in 2009

Percentage of completion- 2009 (8,300,000/ 20,750,000) = 40%

Actual cost incurred to date

Estimated gross profit (P2,950,000 P2,600,000)

* Actual cost incurred / Total estimated cost.

Total realized gross profit

b (P1.2 Billion x 10%)

2010: Construction in Progress

Construction in Progress (cost incurred)

Total estimated costs

Construction on Progress (P1,250,000 + P200,000)

(1) Construction in Progress

(2) Accounts Receivable

(4) Construction in Progress

Problem 10-4, continued:

(1) Construction in progress (cost incurred)

(2) Accounts Receivable

(4) Construction in progress (gross profit)

Engineer's estimate of comp.

(b) Accounts receivable

(d) Cost of constructions

Zero Profit Method: 2011 Entries

(b) Accounts receivable

Problem 10-7, continued:

(d) Cost of construction

(e) Contract billings

Total estimated costs x estimated percentage of completion.

In 2011 when the project is completed.

P20,000 (P220,000 P200,000)

P370,000 [P850,000 (P220,000 + P260,000)]

*P10,360,885 + P50,000 = P10,410,885

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