Quiz VIII

1.Palmer construction company has consistently used the percentage of

completion method of recognizing income. In 20x4 palmer started work on a
P3,000,000 construction contract, which was completed in 20x5. The accounting
records disclosed the following data:
20x4
20x5
Progress billings
1,100,000 1,900,000
Costs incurred
900,000
1,800,000
Collections
700,000
2,300,000
Estimated cost to completed
1,800,000
How much gross profit should Palmer have recognized in 20x4?
2. C&J construction inc has consistently used percentage of completion method
of recognizing income. Last year C&J started work on a P4,500,000 construction
contract, which was completed this year. The accounting records disclosed the
following data for last year:
Progress billings
1,650,000
Costs incurred
1,350,000
Collections
1,050,000
Estimated cost to complete
2,700,000
How much income should C&J have recognized on this contract last year?
3. Shepard construction company uses the percentage of completion method of
accounting. On January 10, 20x5, Shepard began work on a P3,000,000
construction contract. At the inception date, the estimated cost of construction
was P2,250,000. The following data relate to the progress of the contract:
Gross profit recognized at December 31, 20x5
300,000
Costs incurred Jan. 10, 20x5, through Dec. 31, 20x6 1,800,000
Estimated cost to complete at December 31, 20x6 600,000
How much gross profit should Shepard recognized for the year ended December
31, 20x6?
4. Salmon construction company uses the percentage of completion method of
accounting. In 20x5, salmon began work on a project which had a contract price
of 1,600,000 and estimated costs of 1,200,000. Additional information is as
follows:
20x5
20x6
Cost incurred during the year
240,000
1,060,000
Estimated costs to complete as of 12/31/20x5
960,000
Billings during the year
290,000
1,310,000
Collections during the year
250,000
1,200,000
The amount of gross profit Salmon should recognize on this contract during 20x5
is
5. Brown construction company uses the percentage of completion method for
long term construction contracts. A specific job was begun in 20x5 and
completed in 20x7. The contract price was 1,400,000 and cost information as of
each year-end is given below:
20x5
20x6
20x7

End of year estimated cost to complete

400,000
200,000
0
Annual cost incurred
400,000
400,000
120,000
Assuming Brown correctly recorded gross profit in 20x5, how much gross profit
should the company record in 20x6?
6. The following data relate to a construction job started by Worthington co.
during 20x5:
Total contract price
300,000
Actual costs incurred during 20x5
60,000
Estimated remaining cost
120,000
Billed to customer during 20x5
90,000
Received from customer during 20x6
30,000
Under the cost recovery method, how much should Worthington recognize as
gross profit for 20x5?
7. In early 20x5, the Miami company signed a contract for construction of an
industrial park to be completed in three years. At the time, estimated total cost
were P2,250,000. And estimated total revenues were 4,000,000. During 20x5,
Miami incurred cost of P960,000 and collected P1,100,000. In December 20x5,
Miami recalculated total costs for the project to be P3,200,000 while estimated
total revenues remained unchanged. What amount of profit(loss) should be
recognized by Miami for 20x5, using the percentage of completion method?
8. In 20x5, Alpha construction began work on a contract with a price of P850,000
and estimated cost of P595,000. Data for each year of the contract are as
follows:
20x5
20x6
20x7
Costs incurred during the year
238,000
319,600
105,000
Estimated costs to complete
357,000
139,400
0
Partial billings
260,000
210,000
380,000
Collections
240,000
200,000
410,000
Under the percentage of completion method of revenue recognition, gross profit
in 20x5 would be
9. On May 1, 20x5 Green construction company entered into a fixed-price
contract to construct an apartment building for P3,000,000. Green appropriately
accounts for this contract under the percentage of completion method.
Information relating to the contract is as follows:
20x5
20x6
At December 31:
Percentage of completion
20%
60%
Estimated costs at completion
2,250,000
2,400,000
Income recognized(cumulative)
150,000
360,000
What is the amount of contract costs incurred during the year ended December
31, 20x6?
10. Jessup construction inc. has consistently used the percentage of completion
method of recognizing income. During 20x5 Jessup started work on a P1,500,000

fixed-price construction contract. The accounting records disclosed the following

data for the year ended December 31, 20x5:
Costs incurred
465,000
Estimated cost to complete
1,085,000
Progress billings
550,000
Collections
350,000
How much loss should Jessup have recognized in 20x5?
11. During 20x5 Gates corp. started a construction job with a total contract price
of P3,500,000. The job was completed on December 15, 20x6. Additional data
are as follows:
20x5
20x6
Actual costs incurred
1,350,000
1,525,000
Estimated remaining costs
1,350,000 --Billed to customer
1,200,000 2,300,000
Received from customer
1,000,000 2,400,000
Under the cost recovery method, what amount should Gates recognize as gross
profit for 20x6?
12. Rainbow construction company uses the percentage of completion method
for long-term construction contracts. The company started a project with a
contract price of P2,750 in 20x5. Given the following data, what is the balance in
Construction in Progress for this contract at the end of 20x5?
20x5
20x6
Costs incurred this year
400
500
Total estimated costs remaining at the end of the year
1,600
1,000
13. Lake construction company uses the cost recovery method for long term
construction contracts. The information for a specific contract as of January 1,
20x5 is shown below:
Costs incurred to date
700,000
Contract price
2,000,000
Estimated remaining cost to complete
800,000
P600,000 of cost was incurred during 20x5 and on December 31, 20x5, the
estimated remaining cost to complete was still P800,000. The correct balance for
the construction in progress at December 31, 20x5 is
14. In 20x5, Aldaus corp. began construction work under a three-year contract.
The contract price is P800,000. Aldaus used the percentage of completion
method for financial accounting purposes. The income to be recognized each
year is based on the proportion of cost incurred to total estimated costs for
completing the contract. The financial presentation relating to this contract at
December 31, 20x5 appear below.
Balance Sheet
Accounts receivable construction contract billings
Construction is progress
50,000
Less contract billings
(47,000)
Cost of uncompleted contract in excess of billings
Income Statement

15,000
3,000

Income (before tax) on the contract recognized in year 1.

How much cash was collected in 20x5 on this contract?

10,000

15. In 20x5, Alpha construction began work on a contract with a price of

P850,000 and estimated cost of P595,000. Data for each year of the contract are
as follows:
20x5
20x6
20x7
Costs incurred during the year
238,000
319,600
105,000
Estimated costs to complete
357,000
139,400
0
Partial billings
260,000
210,000
380,000
Collections
240,000
200,000
410,000
Under the percentage of completion method of revenue recognition, the balance
in construction in progress at the end of 20x6 would be?
16. In 20x5, Alpha construction began work on a contract with a price of
P850,000 and estimated cost of P595,000. Data for each year of the contract are
as follows:
20x5
20x6
20x7
Costs incurred during the year
238,000
319,600
105,000
Estimated costs to complete
357,000
139,400
0
Partial billings
260,000
210,000
380,000
Collections
240,000
200,000
410,000
Under the percentage of completion method of revenue recognition, the net
amount reported for construction in progress inventory at the end of 20x6 would
be
17. In 20x5, Alpha construction began work on a contract with a price of
P850,000 and estimated cost of P595,000. Data for each year of the contract are
as follows:
20x5
20x6
20x7
Costs incurred during the year
238,000
319,600
105,000
Estimated costs to complete
357,000
139,400
0
Partial billings
260,000
210,000
380,000
Collections
240,000
200,000
410,000
Under the percentage of completion method of revenue recognition, the net
amount reported for construction in progress inventory at the end of 20x6 would
be