1. Aside from the initial amount of revenue agreed in the long-term construction contract, additional revenues may be 1.

1. Aside from the initial amount of revenue agreed in the long-term construction contract, additional revenues may be
recognized by the contractor (1) to the extent that it is probable that they will result in revenue and (2) they are capable of recognized by the contractor (1) to the extent that it is probable that they will result in revenue and (2) they are capable of
being reliably measured. Which of the following will not be considered as additional contract revenue by a contractor? being reliably measured. Which of the following will not be considered as additional contract revenue by a contractor?
a. Variation in contract work as instructed by the customer regarding the scope of work to be performed. e. Variation in contract work as instructed by the customer regarding the scope of work to be performed.
b. Claim that the contractor may seek to collect from the customer for customer caused delays or errors in specification f. Claim that the contractor may seek to collect from the customer for customer caused delays or errors in specification
or design. or design.
c. Incentive payments to be paid to the contractor if specified performance standards are met or exceeded or for early g. Incentive payments to be paid to the contractor if specified performance standards are met or exceeded or for early
completion of the contract. completion of the contract.
d. Gain on sale of scrap materials from construction. h. Gain on sale of scrap materials from construction.

2. Which of the following costs shall not be capitalized by the contractors as part of the construction in progress? 2. Which of the following costs shall not be capitalized by the contractors as part of the construction in progress?
a. Selling costs. e. Selling costs.
b. Costs of direct materials used in construction. f. Costs of direct materials used in construction.
c. Site labor costs, including site supervision. g. Site labor costs, including site supervision.
d. Costs of moving plant, equipment and materials to and from the contract site. h. Costs of moving plant, equipment and materials to and from the contract site.

3. Which of the following costs shall be capitalized by the contractor as part of the construction in progress?
a. Systematic and rationally allocated construction overhead costs such as preparation and processing of construction
personnel payroll and borrowing costs.
b. General administration costs for which reimbursement is not specified in the contract.
c. Research and development costs for which reimbursement is not specified in the contract.
d. Depreciation of idle plant and equipment that is not used on a particular contract.
3. Which of the following costs shall be capitalized by the contractor as part of the construction in progress?
e. Systematic and rationally allocated construction overhead costs such as preparation and processing of construction
personnel payroll and borrowing costs.
f. General administration costs for which reimbursement is not specified in the contract.
g. Research and development costs for which reimbursement is not specified in the contract.
h. Depreciation of idle plant and equipment that is not used on a particular contract.

4. Which of the following accounting changes shall be treated retrospectively instead prospectively by the long-term 4. Which of the following accounting changes shall be treated retrospectively instead prospectively by the long-term
construction contractor? construction contractor?
a. Change in the construction revenue. e. Change in the construction revenue.
b. Change in the estimated costs to complete the contract. f. Change in the estimated costs to complete the contract.
c. Change in the estimate of the outcome of the contract. g. Change in the estimate of the outcome of the contract.
d. Change from percentage of completion to cost recovery method or vice versa h. Change from percentage of completion to cost recovery method or vice versa

5. On July 1, 2016, ABC Construction contracted to build an office building for XYZ Inc. for a total contract price of P 975,000. 5. On July 1, 2016, ABC Construction contracted to build an office building for XYZ Inc. for a total contract price of P 975,000.

2016 2017 2018 2016 2017 2018

Contract cost incurred to date 75,000 600,000 1,050,000 Contract cost incurred to date 75,000 600,000 1,050,000
Estimated costs to complete the contract 675,000 400,000 - Estimated costs to complete the contract 675,000 400,000 -
Billings to XYZ, Inc. 150,000 550,000 275,000 Billings to XYZ, Inc. 150,000 550,000 275,000

 Under the percentage of completion method, how much is the Construction-in-Progress at December 31, 2017?  Under the percentage of completion method, how much is the Construction-in-Progress at December 31, 2017?
 Under the zero-profit method, how much is the Construction-in-Progress, net of Progress Billings at December 31,  Under the zero-profit method, how much is the Construction-in-Progress, net of Progress Billings at December 31,
2017? 2017?
 Under the percentage of completion method, how much is the realized gross profit/ (loss) at December 31, 2018?  Under the percentage of completion method, how much is the realized gross profit/ (loss) at December 31, 2018?

6. On January 1, 2016, Brave Construction began constructing a P 2,100,000 contract. The entity used the percentage of 6. On January 1, 2016, Brave Construction began constructing a P 2,100,000 contract. The entity used the percentage of
completion method. For the year ended December 31, 2017, Brave Construction billed its client and additional 55% of the completion method. For the year ended December 31, 2017, Brave Construction billed its client and additional 55% of the
contract price. contract price.

2016 2017 2018 2016 2017 2018

Construction in progress 441,000 ? ? Construction in progress 441,000 ? ?
Estimated cost to complete ? ? - Estimated cost to complete ? ? -
Costs incurred 425,250 969,000 675,750 Costs incurred 425,250 969,000 675,750
Excess of construction in progress over billings (84,000) (330,750) - Excess of construction in progress over billings (84,000) (330,750) -

 How much is the estimated cost to complete in 2016?  How much is the estimated cost to complete in 2016?
 How much is the realized gross profit or (loss) in 2017?  How much is the realized gross profit or (loss) in 2017?
 How much is the balance of construction in progress in 2017?  How much is the balance of construction in progress in 2017?