Chapter 8

Problem VIII
1. Percentage of Completion Method (Cost-to-cost Approach)
20x4  20x5 20x6 
Contract price ................... P250,000 P250,000 P250,000
Current year costs ............... 110,000 120,000 15,000
Costs to date .................... 110,000 230,000 245,000
Estimated cost to complete ....... 100,000 20,000 0
Estimated total cost ............. 210,000 245,000 240,000
Estimated total gross profit ..... 40,000 5,000 5,000
Percent complete ................. 52% 94% 100%
Revenue to date .................. P130,000 P230,000 P250,000

To Date  Previous  Current  

at Dec. 31 Years   Year   
20x4: Revenue P130,000  P130,000 
Costs (110/210 x 210) 110,000  110,000 
Gross profit P 20,000  P 20,000 

20x5: Revenue P235,000  P130,000  P105,000 

Costs (230/245 x 245) 230,000  110,000  120,000 
Gross profit (loss) P 5,000  P 20,000  P(15,000)

20x6: Revenue P250,000  P235,000  P 15,000 

Costs 245,000  230,000  15,000 
Gross profit P 5,000  P 5,000  P 0 

20x4  20x5    20x6 

1. Revenue recognized during
the year P130,000 P100,000  P15,000
2. Gross profit recognized during
the year 20,000 (15,000) 0
3. Balance in the construction in
progress account at Dec. 31 . 130,000 235,000  0
4. Balance in the progress
billings account at Dec. 31 . 125,000 250,000  0
5. Net (3-4) or (4-3) – due from (due to) 5,000 (15,000) 0

2. Cost Recovery Method

20x4  20x5    20x6 
1. Revenue recognized during
the year P110,000 P120,000  P20,000
2. Gross profit recognized during
the year 0 0 5,000
3. Balance in the construction in
progress account at Dec. 31 . 110,000 230,000  0
4. Balance in the progress
billings account at Dec. 31 . 125,000 250,000  0
5. Net (3-4) or (4-3) – due from (due to) (15,000) (20,000) 0