PRACTICE EXERCISE

In 20x1, XYZ Company enters into a construction contract with a customer. The contract price is
P10,000,000. Information on the contract follows:

20X1 20X2 20X3

Contract costs incurred during the year P2,645,132 P236,451 P2,657,000
Estimated costs to complete 2,697,451 2,116,777 -
Progress Billings 5,000,000 3,000,000 2,000,000
Collections on progress billings 2,000,000 4,000,000 4,000,000

Using the cost-to-cost method, compute the following: Note: Use up to two (2) decimal places in
presenting the answer for percentage of completion. Use six (6) decimal places when applying the
percentage.

1. Percentage of completion for 20x1 49.51%

Cost incurred to date 2,645,132
Divide: Total cost at completion 5,342,583
Percentage of Completion for 20x1 49.51%

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2. Revenue that should be recognized in 20x1 P 4,951,000

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Contract Price 10,000,000
Multiply: POC 49.51% .

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Revenue 20x1 P 4,951,000
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3. Realized gross profit in 20x1 P 2,305,868
Revenue 20x1 4,951,000
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Less: Cost incurred 20x1 2,645,132

Gross Profit 20x1 P 2,305,868
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vi y re

4. Balance of "Contract Liability" at the end of 20x1 P 49,000

Progress Billing 20x1 5,000,000
Less: Revenue 20x1 4,951,000
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Gross Profit 20x1 P 49,000

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5. Percentage of completion for 20x2 57.65%

Cost Incurred 20x1 2,645,132
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Add: Cost incurred 20x2 236,451

Total 2,881,583
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Divide: Cost to complete 4,998,360

Percentage of Completion 20x2 57.65%

6. Revenue that should be recognized in 20x2 P 814,000

sh

Total Contract Price 10,000,000

POC 20x2 57.65% .
Total 5,765,000
Revenue 20x1 4,951,000
Revenue 20x2 P 814,000
7. Realized gross profit in 20x2 P 577,549

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 Revenue 20x2 814,000
Less: Cost incurred 20x2 236,451
Gross Profit 20x2 P 577,549

8. The balance of "Contract Liability" at the end of 20x2 P 2,235,000

Contract Liability 20x1 49,000
Add: Progress Billing 20x2 3,000,000
Less: Revenue 20x2 814,000
Contract Liability 20x2 P 2,235,000

9. Revenue that should be recognized in 20x3 P 4,235,000

POC 20x3 100%
Revenue to date 10,000,000
Less: Recognized in prior years 5,765,000
Revenue 20x3 P 4,235,000

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10. Realized gross profit in 20x3 P 1,578,000

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Revenue 20x3 4,235,000

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Less: Cost incurred 20x3 2,657,000
Gross Profit P 1,578,000

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