Long-Term Construction

Name: ___________________________ ID No.: _______ Score: ________ Rating: _________

On January 1, 20x6, Brave Construction Corporation began constructing a P2,100,000 contract. The entity used the percentage 2004 2005
of completion method. For the year ended December 31, 20x7, Brave Construction billed its client an additional 55% of the Cost incurred to date P4,920,000 P8,640,000
contract price. Estimated costs to complete 4,920,000 2,160,000
20x6 20x7 20x8 9. What gross profit (loss) should Velocity Corporation recognize in 2004? (P240,000)
Construction Revenue 441,000 ? ? 10. What gross profit (loss) should Velocity Corporation recognize in 2005? (P480,000)
Estimated costs to complete ? ? -
Costs incurred 425,250 969,000 675,750 In 2003, Good Guys Construction Company agreed to construct an apartment building at a price of P2,500,000. The company uses the
Excess of CIP over billings or (excess of billings over CIP) (84,000) (330,750) - percentage of completion method.
1. How much is the estimated remaining cost in 20x6? 1,599,750 2003 2004 2005
2. How much is the realized gross profit (loss) in 2017? (60,750) Cost incurred to date P700,000 P1,500,000 P1,962,500
3. How much is the balance of construction in progress in 20x7? 1,349,250 Estimated costs yet to be incurred 1,300,000 500,000 -
4. Prepare all the necessary journal entries on 20x6 and 20x7 using percentage of completion method and zero-profit method Customer billings to date 375,000 1,000,000 2,500,000
on 20x8. Collection of billings to date 300,000 800,000 2,350,000
11. What is the balance of the Construction in Progress, net of Contract Billings account as of December 31, 2004? P875,000
Eric Construction has consistently used the percentage of completion method. On January 10, 2003, Eric began work on a P6,000,000
construction contract. At the inception date, the estimated cost of construction was P5,000,000. The following data relate to the progress The Bjorn Construction Company was the lowest bidder on a specialized equipment contract. The contract bid was P35,000,000 with an
of the contract. estimated cost to complete the project of P26,500,000. The contract period was 33 months, beginning January 1, 2004. The company
Income recognized at December 31, 2003 P300,000 uses the cost-to-cost method to estimate profits. A record of construction activities for the years 2004-2006 follows:
Cost incurred 1/10/2003 thru 12/31/04 3,600,000 2004 2005 2006
Estimated cost to complete at 12/31/2004 1,200,000 Actual cost current year P17,500,000 P11,750,000 P1,750,000
5. How much income should Eric recognize for the year ended December 31, 2004? P600,000 Estimated cost to complete 10,500,000 3,250,000 -
Progress Billings 16,000,000 12,000,000 7,000,000
The following information pertains to a river-control project of Rathaus Konstrukt Inc. in Santiago, Isabela that was commenced in 2002 Cash receipts 15,000,000 10,000,000 10,000,000
and completed the following year: 12. What is the balance of Construction in Progress, net of Contract Billings account as of December 31, 2005? P3,500,000 CA
At June 30, 2002 At June 30, 2003
Costs incurred to date P9,750,000 15,750,000 DD Construction Company began operation January 1, 2003. During the year, the company entered into a contract with GG Company to
Estimated total costs at completion 19,500,000 20,250,000 construct a manufacturing facility. At that time, DD estimated that it would take five years to complete the facility at a total cost of
The project is a P22,500,000 fixed price construction contract and Rathaus uses the percentage-of-completion method of accounting. P5,400,000. The total contract price for construction of the facility is P7,500,000. During the year, the company incurred P1,320,000 in
6. What is the income reported by Rathaus on its Isabela project on June 30, 2003? P250,000 construction costs related to the construction project. The estimated cost to complete the contract is P4,680,000. GG was killed and paid
30% of the contract price subject to a 10% retention.
The Revenge Builders Company enters into a contract on January 1, 2004, to construct a 10-storey building for P16,000,000. During the 13. Using the percentage of completion method, how much is the Construction in Progress or excess of Contract Billings over
construction period, many change orders are made to the original contract. The following schedule summarizes these changes made in Construction in Progress? (Indicate if current asset or current liability) P600,000 (current liability)
2004: Use percentage of completion method
Cost Incurred 2004 Estimated Cost to Complete Contract Price
Basic contract P3,200,000 P11,200,000 P16,000,000
Change order no. 1 20,000 20,000 50,000
Change order no. 2 0 20,000 0
Change order no. 3 120,000 120,000 Still to be negotiated, at least cost
Change order no. 4 50,000 0 P100,000
7. Realized gross profit for the year ended December 31, 2004. P376,922

BG Mall Builders was recently awarded a P1,120,000 contract to construct a shopping mall for Rustan Inc. BG Mall Builders estimates it
will take 42 months to complete the contract. The company uses the cost-to-cost method to estimate profits. (Use two decimal places)
The following information details the actual and estimated costs for the year 2002-2005:
Year Actual Cost Each Year Estimated Cost to Complete
2002 P520,000 P544,000
2003 264,000 312,000
2004 192,000 152,000
2005 136,000 -
8. How much is the realized gross profit(loss) in 2004? P(25,167)

Velocity Corporation entered into a construction agreement in 2004 that called or a contract price of P9,600,000. At the beginning of
2005, a change order increased the initial contract price by P480,000. The company uses the percentage of completion method for
completing the project.