Chapter 10 Advance Accounting Solman

Long-Term Construction Contracts
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:
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:
2012 (3,900,000/7,800,000)
2013(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
2012
2013
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 2012
Gross profit earned in 2013
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)
177
Chapter 10
10-5:
10-6:
10-7:
b
Total cost to date, 2013 (4,800,000 X 60%)
Less: Cost incurred in 2010 (4,500,000 X 20%)
Cost incurred in 2013
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, 2012
Add: Cost Incurred
Construction in Progress - 2012
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 - 2012
P 900,000
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
2012
2013
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
10-9:
a
Gross profit (loss) earned in 2013
Gross profit earned in prior years
Gross profit earned to date - 2013
Divide by percentage of completion - 2013
Estimated gross profit - 2013
Less: Contract price
Total estimated cost
Less: Cost incurred - 2013
Cost incurred to date - 2012
Less: Cost incurred - 2011
(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 - 2012 (P40,000 + P140,000)
Divide by estimated gross profit - 2012:
Contract price
P2,000,000
Gross profit rate [180,000/(1,020,000 + 180,000)]
___X 15%
Percentage of completion - 2012
P 180,000
__300,000
60%
10-11: a, Refer to Q 10-10 solutions.

10-12: d
Contract price
Estimated gross profit - 2012 (Refer to Q 10-10)
Less: Cost incurred to date - 2012 (refer to Q 10-9)
Estimated cost to complete - 2012
P2,000,000
__300,000
1,700,000
1,020,000
P 680,000
10-13: d
2012: Construction in progress
Less: Construction costs
Gross profit recognized - 2012
P 244,000
__210,000
P 34,000
2013: Construction in progress (P728,000-P244,000)

Less: Construction costs
Gross profit recognized - 2013
P 484,000
__384,000
P 100,000
179
Chapter 10
10-14:
d
Project 1
Project 2
Contract price
P 300,000
Cost incurred to date - 2013
P 280,000
Estimated cost to complete
___70,000
Total
__350,000
Estimated gross profit (Loss)
(50,000)
Percentage of completion
_______
Profit (loss) to be recognized
(P 50,000)
Total is (P10,000)
P 420,000
P 240,000
__120,000
__360,000
60,000
__66.67%
P 40,000
Zero Profit Method - The loss (P50,000) for project 2 only.

10-15: a
Contract price (cost X 120%)
P3,744,000
Less: Total estimated costs
(1) Cost incurred to date
3,120,000
________
(2) Total
_3,120,000
624,000
Percentage of completion (1 2)
____100%
624,000
__477,360
Gross profit earned this year
146,640
2011
2012 2013
P3,744,000 P3,744,000
546,000
1,544,400
_2,054,000 _1,315,000
_2,600,000 _2,860,000
1,144,000
884,000
_____20%
_____54%
240,240
477,360
_______
__240,240
P 240,240
P 237,120
10-16: d
Contract price
P6,300,000
Cost incurred to date
3,040,000
_1,960,000
Total
P5,000,000
1,300,000
Percentage of completion:
2012 (1,425,000 - 50,000) 5,500,000
2013 (3,040,000 - 50,000) 5,000,000
__59.80%
Profit earned to date
777,400
__200,000
P 577,400
2012 2013
P6,300,000
1,425,000
_4,075,000
P5,500,000
800,000
25%
________
200,000
________
P 200,000
10-17:
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
2,520,000
Less: Total Estimated Costs
(1)
P1,600,000
__200,000
P1,400,000
Apartment A
2012
2013
1,620,000 1,620,000
Apartment B
2012 2013
2,520,000
P 600,000 P1,200,000 P1,560,000
P2,310,000
(2)
2,310,000
Estimated Gross Profit
210,000
_100.00%
210,000
Less: Gross profit earned in Prior years
__187,200
22,800
Total Gross Profit 2013 (P75,000 + P22,800)
840,000
1,440,000
240,000
1,440,000
690,000
2,250,000
180,000
180,000
270,000
_41.67%
_83.33%
_69.33%
75,000
150,000
187,200
_______
___75,000
_______
P 75,000
P 75,000
P 187,000
P97,800
Zero Profit Method : P210,000 gross profit earned in 2013 for Apartment B.
10-19: d
2012
Contract price:
2012
2013 (P6,000,000-P50,000)
P5,950,000
2,650,000
(2) Total estimated cost
2,650,000
3,300,000
___100%
3,300,000
Less: Gross profit earned in Prior year
3,060,000
2013
P6,000,000
_________
2,340,000
260,000
2,600,000
3,400,000
____90%
3,060,000
_______
P3,060,000
240,000
181
Chapter 10
10-20:
a
2011
2012
2013
(1)Cost incurred to date

P6,150,000
(2)Estimated cost to complete
(3)Total Estimated Costs
6,150,000
P3,400,000
1,600,000
5,000,000
Contract price
P6,000,000
6,150,000
(150,000)
Gross profit earned (loss) to date
(150,000)
Add: Cost incurred to date
6,150,000
Construction in Progress
6,000,000
Less: Contract billings
6,000,000
Balance
68%
P6,000,000
5,000,000
P5,950,000
150,000
6,100,000
98%
P6,000,000
6,100,000
1,000,000
(100,000)
68%
680,000
100%
(100,000)
3,400,000
4,080,000
5,950,000
5,850,000
3,200,000
5,200,000
P 880,000
P 650,000
10-21: d
Construction in Progress:
Cost incurred to date, 2012
Gross profit (loss), 2012 (Schedule 1)
P2,500,000
Less: Contract billings, 2011 (P3,250,000 x 75%)
2,437,500
P2,625,000
(125,000)
Excess of Construction in Progress over Contract Billings (CA)

P 62,500
Schedule 1 Computation of gross profit earned:
Contract price
P3,250,000
Total estimated cost:
Cost to date
2,625,000
750,000
Total
3,375,000
2009
P3,250,000
1,075,000
1,612,500
2,687,500
Estimated gross profit (loss)

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

(125,000)
225,000
225,000
40%

P(350,000)
P 225,000
10-22: b
2010
2011
P2,800,000 P2,800,000
Contract price
P2,800,000
Estimated cost:
Cost to date
2,440,000
Estimated costs to complete
380,000
1,300,000
1,360,000
Total
2,820,000
10-23:
780,000
2,660,000

(20,000)
% of completion
RGP to date
RGP in prior years
RGP each year
1,960,000
2,740,000
140,000
60,000
48.87%
68,418
68,418
71.53%
42,918
68,418
(25,500)
(20,000)
42,918
(62,918)
a
2012
Project A
Project B
P2,900,000
P3,400,000
1,680,000
1,120,000
1,440,000
1,760,000
Project
C
Contract price
P 1,700,000
Estimated costs:
Cost to date
960,000
Total
1,280,000
2,800,000
3,200,000

% of completion
100,000
60%
200,000
45%
Gross profit earned this year (P255,000)

P 105,000
P 60,000
P 90,000
Project A
Project B
Project C
P2,900,000
P3,400,000
P1,700,000
2,120,000
0
1,183,000
1,360,000
560,000
117,000
2,640,000
3,480,000
1,300,000
2013
320,000
420,000
Project
D
Contract price
P 2,000,000
Estimated costs
Cost to date2,640,000
1,040,000
Total
1,600,000
% of completion
260,000
100%

Gross profit earned in prior year
260,000
60,000
Gross profit earned this year(P429,000)
P 200,000
(80,000)
400,000
91%
400,000
(80,000)
364,000
90,000
105,000
140,000
P(170,000)
P 140,000
2012
P 255,000
Gross profit earned

P 429,000
General and administrative expenses
120,000
Net income
P 309,000
120,000
P 135,000
10-24: c
Contract price
P10,000,000
Gross profit earned to date, 2012 (P900,000 P100,000)
800,000
Total cost to date, 2013

9,200,000
Less: cost incurred in 2013
4,100,000
Cost to date, 2012
P 5,100,000
900,000
Divided by % of completion:
(P5,100,000 + P900,000) / P10,000,000
Estimated gross profit, 2012
P 1,500,000
10-25: d
Construction in progress:
P 440,000
Gross profit earned to date (P2,500,000 P2,000,000)
110,000
Total
Less: Contract billings (P2,500,000 x 30%)
550,000
750,000
Excess of contract billings over construction in progress (CL)

P( 200,000)
183
Chapter 10
10-26:
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)
P120,000,000
10,000,000
30,000,000
5,000,000
45,000,000
55,000,000
100,000,000
20,000,000
45%
Gross profit to be recognized

10-27:
P 9,000,000
a
Cost incurred to date- 2012
Total estimated cost (8,000,000 / 40%)
20,000,000
8,000,000
3,700,000
Estimated cost at completion- 2011
Total estimated cost- 2011
P12,000,000
3,700,000
8,300,000
12,450,000
P20,750,000
Percentage of completion- 2009 (8,300,000/ 20,750,000) = 40%

10-28:
a
2012
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
2013
Contract 1
600,000
350,000
250,000
80%
200,000
150,000
50,000
Contract price
Gross profit earned in 2012
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, 12/31/013
Contract 3
900,000
500,000
400,000
36%
144,000
144,000
P 640,000
434,000
P1,074,000
10-29:
a
Contract price
Cost incurred
Bicol
P875,000
656,250
Davao
Aklan
P1,225,000 P437,500
175,000
175,000
Total
1,006,250
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)
10-30:
175,000
350,000
87,500
50%
P43,750
1,006,250
332,500
1,338,750
1,312,500
26,250
a
Contract price
Cost incurred
Gross profit recognized
10-31:
700,000
875,000
350,000
20%
P 70,000
332,500
Zero Profit
1,006,250
218,750
1,225,000
1,312,500
(87,500)
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
185
Chapter 10
10-32: 1.
Contract price
Project 1
P420,000
Project 2
P150,000
Less total estimated costs

% of completion:
Project 1 (P120,000 / P180,000)
Project 2
Realized gross profit (loss)
Expenses
Net income (loss), Dec. 31, 2013, P120,000
2.
180,000
240,000
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:
Contract price
2011
P6,600,000
2012
P6,600,000
2013
P6,600,000
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.
6,600,000
6,600,000
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
187
Chapter 10
SOLUTIONS TO PROBLEMS
Problem 10 1
(a)
2012
2013
Contract Price
P 450,000
_______
(2) Total
_320,000
___100%
Estimated gross profit to date
__100,000
30,000
(b)
Contract Price
P 450,000
Less: Total cost incurred
__320,000
Gross profit
P 130,000
(c)
2012: Construction in Progress

Cost of construction
Construction Revenue
300,000
2013: Construction in Progress
Cost of Construction
350,000
P 450,000
200,000
__100,000
320,000
__300,000
150,000
______2/3
130,000
100,000
_______
130,000
P 100,000P
100,000
200,000
30,000
320,000
Problem 10 2
(a)
P1,250,000
Less: Cost incurred
_1,250,000
Gross profit 2013
0
Construction in Progress (cost incurred)
P1,250,000
Less: Contract billings (P5,800,000 x 30%)
_1,740,000
Billings in excess of related costs
P(490,000)
(b)
Contract price
P5,800,000
5,000,000
Percentage of Completion (P1,250,000 500,000)
_____25%
Gross profit
P 200,000
P1,250,000
3,740,000
800,000
Construction on Progress (P1,250,000 + P200,000)

P1,450,000
Less: Contract billings
_1,740,000
Billings in excess of related costs
P(290,000)
188
Problem 10 3
2010
P55,000,000
(a)
Contract Price
P55,000,000
50,000,000
________
(2) Total
50,000,000
5,120,000
____100%
5,000,000
Gross profit earned in prior yr(s)
_3,500,000
Gross profit earned the year
P 1,500,000
2011
P55,000,000
2012
P55,000,000
15,000,000
25,000,000
35,000,000
_35,000,000
25,000,000
15,000,000
_50,000,000
50,000,000
50,000,000
5,000,000
5,000,000
5,000,000
______30%
_____50%
_____70%
1,500,000
2,500,000
3,500,000
________
_1,500,000
_2,500,000
P 1,500,000
P 1,000,000
P 1,000,000
(b)
2012
(1) Construction in Progress
Cash or Payable
15,000,000
15,000,000
(2) Accounts Receivable

Contract Billings
15,000,000
2013
15,000,000
15,000,000
20,000,000
15,000,000
2013
20,000,000
(3) Cash
Accounts Receivable
25,000,000
12,000,000
(4) Construction in Progress

Cost of Construction
16,500,000
1,000,000
15,000,000
25,000,000
12,000,000
1,500,000
15,000,000
16,000,000
Problem 10 4
(a)
P10,000,000
Divide by total estimated cost
_12,000,000
Percentage of Completion
(b)
Contract Price
P15,000,000
Less: Total Estimated Cost
10,000,000
__2,000,000
Total
_12,000,000
3,000,000
___83.33%
9,500,000
Less: Gross profit earned in prior yrs.
_2,000,000
P 500,000
2011
P 1,000,000
2012
P 5,500,000
P 9,000,000
P11,000,000
11.11%
50%
2011
P15,000,000
2012
P15,000,000
1,000,000
5,500,000
__8,000,000
__5,500,000
__9,000,000
_11,000,000
6,000,000
4,000,000
___11.11%
______50%
666,600
2000,000
________
___666,600
P 666,600
P 1,333,400
189
10
Problem 10-4, continued:
(c)
2013
83.33%
2013
Chapter
(1) Construction in progress (cost incurred)

Cash
1,000,000
1,000,000
(2) Accounts Receivable

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

1,666,600
666,600
1,000,000
Problem 10 5
(1)
2010
P14,000,000
Contract Price
P14,000,000
Less: Total Estimated Cost
6,500,000
13,900,000
__6,800,000
________
Total
_13,300,000
13,900,000
700,000
___48.87%
____100%
342,090
Less: Gross profit (loss) in prior yrs. ________
( 100,000)
Gross profit (loss) this year
P 342,090
200,000
(2)
2010
2011
P14,000,000
2012
P14,000,000
9,800,000
12,200,000
_3,900,000
_1,900,000
13,700,000
14,100,000
300,000
___71.53%
( 100,000)
_____100%
100,000
214,590
___342,090
( 100,000)
___214,590
100,000
P( 127,500)
P( 314,590)
2011
2012
2013
2013
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
2010
P 6,000,000
2011
P 6,000,000
2012
P 6,000,000
3,400,000
_2,100,000
_5,500,000
500,000
___61.82%
5,950,000
___150,000
_6,100,000
( 100,000)
_______
6,150,000
________
_6,150,000
( 150,000)
________

Gross profit (loss) in prior yrs.
Gross profit (loss) this year
309,100
________
P 309,100
( 100,000)
__309,100
P 409,100
( 150,000)
( 100,000)
P 50,000

190
(2)
50,000
150,000
(3)
Cash
Accounts Receivable
Contract Billings
2010
3,400,000
309,100
2011
2,550,000
409,100
3,709,100
2012
200,000
2,140,900
400,000
400,000
6,000,000
6,000,000
Problem 10 7
(1)
2011
Contract Price
P16,000,000
Less:Total Estimated Cost
4,600,000
__9,640,000
Total
_14,240,000
1,760,000
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
5,250,000
2012
P16,000,000
2013
P16,000,000
9,100,000
__5,100,000
_14,200,000
1,800,000
______58%
1,044,000
__545,600
P 498,410
14,350,000
_________
_14,350,000
1,650,000
_____100%
1,650,000
_1,044,000
P 606,000
2011
4,600,000
2012
4,500,000
4,600,000
(b) Accounts receivable

Contract billings
5,000,000
5,000,000
(c) Cash
Accounts receivable
6,100,000
4,500,000
(d) Cost of constructions

4,600,000
545,600
2013
5,250,000
4,500,000
6,000,000
5,000,000
5,000,000
6,000,000
5,400,000
4,500,000
6,100,000
5,400,000
4,500,000
498,400
5,250,000
606,000
Construction revenue
5,856,000
(e) Contract billings
Construction on progress
16,000,000
(3)
5,145,600
4,998,400
16,000,000
Zero Profit Method: 2013 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
191
Chapter 10
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).
*
6,720,000
*
2011
2012
2013
4,414,400
3,821,600
6,114,000
545,600
498,400
606,000
4,960,000
4,320,000
Total estimated costs x estimated percentage of completion.

Problem 10 8
(1)
Contract Price
P6,500,000
Less:Total Estimated Costs
6,850,000
________
Total
_6,850,000
(350,000)
Less: Gross profit (loss) in prior yrs.
_(250,000)
2011
P6,500,000
2012
P6,500,000
2,150,000
5,250,000
_3,850,000
_1,500,000
_6,000,000
_6,750,000
500,000
(250,000)
________
___520,000
2013
Gross profit (loss) this years

P( 600,000)
(2)
P 520,000
P( 250,000)
In 2013 when the project is completed.
Problem 10-9
1.
2.
3.
4.
5.
6.
P20,000 (P220,000 P200,000)

P260,000 (P250,000 + P10,000)
P370,000 [P850,000 (P220,000 + P260,000)]
P380,000 (P370,000 + PP10,000)
P830,000 (P200,000 + P250,000 + P380,000)
P86,095:
2013: 450/640 = 0.7031 x P850,000 = P597,635
Less cost to date
450,000
Gross profit to date
147,635
2012: 200/650 = 0.3077 x P200,000 = (61,540)
RGP - 2013
P86,095

192
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 2013
P4,000,000
2,070,000
1,380,000
3,450,000
Building 2
2013
P4,000,000
3,000,000
750,000
3,750,000
Prior
To 2013
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
2013
P9,000,000
8,118,000
9,118,000
Prior
To 2013
P13,150,000
3,000,000
9,000,000
12,000,000
2013
P13,150,000
10,400,000
2,800,000
13,200,000
2013
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
Prior to 2013
P12,707,500
2013
P10,853,385
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
11,388,000
P1,319,500
P9,000,000
8,118,000
P 882,000
( 50,000)
P 832,000
10,940,885
P (87,500)

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Long-Term Construction Contracts

Zero Profit Method:

Long-Term Construction Contracts

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

2013: Construction in progress (P728,000-P244,000)

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

Long-Term Construction Contracts

Cost incurred to date:

P 600,000 P1,200,000 P1,560,000

(1)Cost incurred to date

Excess of Construction in Progress over Contract Billings (CA)

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)

Gross profit (loss) to date

Gross profit earned this year(P429,000)

Gross profit earned

Total cost to date, 2013

Excess of contract billings over construction in progress (CL)

Gross profit to be recognized

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

Actual cost incurred to date

Long-Term Construction Contracts

Est. cost to complete

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

Less total estimated costs

* Actual cost incurred / Total estimated cost.

Total realized gross profit

b (P1.2 Billion x 10%)

Long-Term Construction Contracts

Reduction due to delay

2012: Construction in Progress

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

(2) Accounts Receivable

(4) Construction in Progress

(1) Construction in progress (cost incurred)

(2) Accounts Receivable

(4) Construction in progress (gross profit)

Gross profit (loss) to date

Long-Term Construction Contracts

(b) Accounts receivable

(d) Cost of constructions

Zero Profit Method: 2013 Entries

(b) Accounts receivable

(d) Cost of construction

(e) Contract billings

Total estimated costs x estimated percentage of completion.

Gross profit (loss) this years

In 2013 when the project is completed.

P20,000 (P220,000 P200,000)

Long-Term Construction Contracts

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

Total costs all buildings

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