ACCOUNTING REFRESHER COURSE 1

ADVANCE FINANCIAL ACCOUNTING AND REPORTING

LONG TERM CONSTRUCTION CONTRACT
1. The records of Federer Construction in 2022 showed the following:
Project A Project B
Contract price 588,000 420,000
Cost incurred in 2022 336,000 392,000
Estimated costs to complete 168,000 56,000
Under the percentage-of-completion method how much gross profit should the company report in 2022?
a. P 588,000 b. P476,000 c. P258,000 d. P28,000
2. In 2021 Nadal Builders started work on a P6,750,000 fixed price construction contract. The company uses the
percentage-of-completion method of accounting for this type of contract. The records of the Co. showed the ff:
Cumulative Contract Cost Est. Total Cost at completion

2021 2,925,000 5,850,000

2022 4,725,000 6,075,000
How much income should be reported on December 31, 2022?
a. P75,000 b. P225,000 c. P450,000 d. P525,000
3. On January 1, 2021, Djokovic Construction Co. which uses the percentage-of-completion method
began work on a P9,000,000 construction contract. The following data relate to the progress of the contract:
Income recognized at Dec. 31, 2021 P 900,000
Cost incurred Jan. 1, 2017 - Dec. 31, 2022 5,400,000
Estimated cost to complete at Dec. 31, 2022 1,800,000
On Dec. 31, 2022, how much income should be recognized by Djokovic Company?
a. P787,500 b. P450,000 c. P1,350,000 d. P900,000
4. Murray Company uses the percentage-of-completion method of recognizing income from construction
contracts. In 2021, the company entered into a contract for the construction of a mall for P 100,000,000.
Dec. 31, 2021 Dec. 31, 2022
Estimated total cost at completion P75,000,000 P 80,000,000
Income recognized (cumulative) 5,000,000 12,000,000
Percentage of completion 20% 60%
How much is the total contract cost in 2022?
a. P32,000,000 b. P35,000,000 c. P33,000,000 d. P48,000,000
5. Cilic Construction Company uses the percentage of completion method of accounting. The company
started work on two job sites during the current year. Data relating to the two jobs are given below:
Contract Price Actual Cost Est. Cost to
Dec. 31, 2021 Complete
Contract 1 P 600,000 150,000 P 150,000
Contract 2 450,000 87,500 162,500
In 2022, Contract 3 was started for a contract price of P 900,000. As of Dec. 31, 2022, the ff. data are given:
Actual Cost Est. cost to
1/1/21-12/31/22 complete
Contract 1 P 280,000 P 70,000
Contract 2 180,000 120,000
Contract 3 180,000 320,000
How much income should be reported for the year 2022?
a. P90,000 b. P214,000 c. P144,000 d. P434,000
6. On January 2, 2022 YY Construction Co. entered into a contract to construct two projects.
Project 1 Project 2
Contract price P 945,000 P 675,000
Costs incurred during 2022 540,000 630,000
Estimated cost to complete 270,000 157,500
Billings to customers 337,500 607,500
What amount of gross profit should YY Const. Co. report in his 2022 income statement under the ff. method?
(a) (b) ('c) (d)
Percentage of Completion P -0- P(112,500) P(22,500) P(22,500)
Zero Profit Method P(90,000) P(22,500) P -0- P(112,500)