PROBLEM 3

Requirement 1
Percentage of Completion Method
2018 2019 2020
Contract Price P 16,000,000 P 16,000,000 P 16,000,000
Costs incurred each year P 4,600,000 P 4,500,000 P 5,250,000
Add: Costs incurred in prior years --- 4,600,000 9,100,000
Actual costs incurred to date (1) P 4,600,000 P 9,100,000 P 14,350,000
Add: Estimated costs to complete 9,640,000 5,100,000 ---
Total estimated costs (3) P 14,240,000 P 14,200,000 P 14,350,000
Estimated gross profit P 1,760,000 P 1,800,000 P 1,650,000
Percentage of completion (1)/(3) 32% 64% 100%
Gross profit to date P 563,200 P 1,152,000 P 1,650,000
Less: Gross profit in prior years --- 563,200 1,152,000
Gross profit in current year P 563,200 P 588,800 P 498,000

Engineer's Estimates
2018 2019 2020
Contract Price P 16,000,000 P 16,000,000 P 16,000,000
Costs incurred each year P 4,600,000 P 4,500,000 P 5,250,000
Add: Costs incurred in prior years --- 4,600,000 9,100,000
Actual costs incurred to date P 4,600,000 P 9,100,000 P 14,350,000
Add: Estimated costs to complete 9,640,000 5,100,000 ---
Total estimated costs P 14,240,000 P 14,200,000 P 14,350,000
Estimated gross profit P 1,760,000 P 1,800,000 P 1,650,000
Percentage of completion -
Engineer's estimate 31% 58% 100%
Gross profit to date P 545,600 P 1,044,000 P 1,650,000
Less: Gross profit in prior years --- 545,600 1,044,000
Gross profit in current year P 545,600 P 498,400 P 606,000
Requirement 2
Journal Entries - Percentage of Completion Method
2018 2019 2020

Construction in Progress 4,600,000 4,500,000 5,250,000

Cash 4,600,000 4,500,000 5,250,000
To record costs incurred

Accounts Receivable 5,000,000 6,000,000 5,000,000

Progress billings 5,000,000 6,000,000 5,000,000
To record progress billings

Cash 4,500,000 5,400,000 6,100,000

Accounts receivable 4,500,000 5,400,000 6,100,000
To record collections

Construction in progress 563,200 588,800 498,000

Construction costs 4,556,800 4,531,200 5,262,000
Construction revenue 5,120,000 5,120,000 5,760,000
To recognize revenue

Progress billings 16,000,000

Construction in progress 16,000,000
To record settlement
Requirement 3
Journal Entries - Zero profit method
2020
Construction in Progress 5,250,000
Cash 5,250,000
To record costs incurred

Accounts Receivable 5,000,000

Progress billings 5,000,000
To record progress billings

Cash 6,100,000
Accounts receivable 6,100,000
To record collections

Construction in progress 1,650,000

Construction costs 5,250,000
Construction revenue 6,900,000
To recognize revenue

Progress billings 16,000,000

Construction in progress 16,000,000
To record settlement
PROBLEM 4 62% 83% 100%
2018 2019 2020 2021
Contract Price P 55,000,000 P 55,000,000 P 55,000,000 P 55,000,000
Costs incurred each year P 15,000,000 P 25,000,000 P 35,000,000 P 50,000,000
Add: Costs incurred in prior years --- 15,000,000 40,000,000 75,000,000
Actual costs incurred to date (1) P 15,000,000 P 40,000,000 P 75,000,000 P 125,000,000
Add: Estimated costs to complete 35,000,000 25,000,000 15,000,000 ---
Total estimated costs (3) P 50,000,000 P 65,000,000 P 90,000,000 P 125,000,000
Estimated gross profit P 5,000,000 P (10,000,000) P (35,000,000) P (70,000,000)
Percentage of completion (1)/(3) 30% 100% 100% 100%
Gross profit to date P 1,500,000 P (10,000,000) P (35,000,000) P (70,000,000)
Less: Gross profit in prior years --- 1,500,000 (10,000,000) (35,000,000)
Gross profit in current year P 1,500,000 P (11,500,000) P (25,000,000) P (35,000,000)
to date rec. in current year
revenue 16,500,000 16,500,000
cost 15,000,000 15,000,000
gp 1,500,000 1,500,000
rec. in prior yrs
revenue 34,100,000 16,500,000 17,600,000
cost 44,100,000 15,000,000 29,100,000
gp (10,000,000) 1,500,000 (11,500,000)

#NAME? 45,650,000 34,100,000 11,550,000

#NAME? 80,650,000 44,100,000 36,550,000
#NAME? (35,000,000) (10,000,000) (25,000,000)

#NAME? 55,000,000 45,650,000 9,350,000

#NAME? 125,000,000 80,650,000 44,350,000
#NAME? (70,000,000) (35,000,000) (35,000,000)
Journal Entries 2020 2021
Construction in Progress 35,000,000 50,000,000
Cash 35,000,000 50,000,000
To record costs incurred

Accounts Receivable 35,000,000 55,000,000

Progress billings 35,000,000 55,000,000
To record progress billings

Cash 30,000,000
Accounts receivable 30,000,000 55,000,000
To record collections 55,000,000

Construction costs 36,550,000 44,350,000

Construction in progress 25,000,000 35,000,000
Construction revenue 11,550,000 9,350,000
To recognize revenue

Progress billings 55,000,000

Construction in progress 55,000,000
To record settlement