I. Luffy Inc. works on a P10,500,000 contract in 2020 to construct an office building. During 2020, Luffy Inc.

uses the
cost-to-cost method. At December 31, 2020, the balances in certain accounts were:

Construction in progress - P3,780,000

Accounts receivable 360,000
Billings on construction in process 1,800,000
Contract retention 180,000
Mobilization fee 140,000
At December 31, 2020, the estimated cost at completion 7,350,000

How much is the realized gross profit in 2020?

a. 1,102,500 c. 1,242,500
b. 1,062,500 d. 1,134,000

II. In 2019, PJD Construction Co. began construction work under a 3-year contract. The contract price was P4,000,000.
PJD uses the percentage of completion method/over time for financial accounting purposes. The income to be
recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract.
The financial statement presentation relating to this contract at December 31, 2019 was as follows:

Balance sheet
Accounts receivable – construction contract billings P 86,000
Construction in progress P260,000
Less: Contract billings 246,000
Costs of uncompleted contract in excess of billings 14,000

Income statement/Statement of Comprehensive Income

Gross profit (before tax) recognized in 2019 72,800

1. How much was collected in 2019 on this contract?

a. P14,000 c. P160,000
b. P86,000 d. P246,000

2. What was the initial estimated gross profit before tax on this contract?
a. P72,800 c. P260,000
b. P187,200 d. P1,120,000

3. What is the percentage of completion for the year ended?

a. 6.50% c. 28.00%
b. 13.00% d. 100.00%

4. What is the gross profit rate on the contract?

a. 6.50% c.28.00%
b. 13.00% d. 100.00%

III. GEI Enterprise entered into a construction agreement in 2019 that called for a contract price of P9,600,000. Athe
beginning of 2020, a change order increases the initial contract price by P480,000 in relation to the project, the
following data were obtained:
2019 2020
Cost incurred to date P 4,920,000 P 8,640,000
Estimated costs to complete 4,920,000 2,160,000
Billings made to date 5,280,000 8,700,000
Collections made to date 4,920,000 8,700,000

Compute the amount of construction in progress (net)/contract assets or progress billings (net)/contract assets or
progress billings (net)/ contract liabilities for the year 2020:
Percentage of completion method Cost recovery method
(over time) (point in time)
a. P780,000 – liabilities P780,000 – liabilities
b. P780,000 – assets 780,000 – assets
c. P60,000 – liabilities 60,000 liabilities
d. P636,000 – liabilities 636,000 – liabilities