ACCOUNTING FOR SPECIAL TRANSACTIONS

Numbers 1, 2, and 3 (Construction contract - Percentage of Completion Method)

On January 1, 2018, Solid Company accepted a long-term construction project for an initial
contract price of P1,000,000 to be completed on June 30, 2020. On January 1, 2019, the contract
price was increased to P1,500,000 by reason of change in the design of the project. The outcome
of the construction contract can be estimated reliably. The project was completed on December
31, 2020 which resulted to penalty amounting to P200,000. The entity provided the following
data concerning the direct costs related to the said project for 2018 and 2019:

2018 2019
Costs during the year 440,000 680,000
Remaining estimated costs to complete at year- 660,000 280,000
end

1. What is the construction revenue for the year ended December 31, 2018?
A. 340,000
B. 400,000
C. 440,000
D. 360,000

2. What is the realized gross profit for the year ended December 31, 2019?
E. 200,000
F. 80,000
G. 180,000
H. 100,000

3. What is the balance of construction in progress on December 31, 2019?

I. 1,200,000
J. 1,020,000
K. 1,120,000
L. 900,000