1.

On May 1, 2009, Pateros Construction Company entered into a fixed-price contract to

construct an apartment building for P3,000,000. Pateros appropriately accounts for this contract
under the percentage-of-completion method. Information relating to the contract is as follows:

2009 2010

At December 31:
Percentage of completion 20% 60%
Estimated costs at completion P2,250,000 P2,400,000
Income recognized (cumulative) P 150,000 P 360,000

Required: P990,000
What is the amount of contract costs incurred during the year ended December 31, 2010?

2010:
Estimated costs at completion x % of completion P1,440,000
P2,400,000 x 60%
2009:
Estimated costs at completion x % of completion (450,000)
P2,250,000 x 20%
Contract costs incurred, 2010 P990,000

2. Navotas Construction, Inc. has consistently used the percentage-of-completion method of

recognizing income. Last year, Navotas started work on a P4,500,000 construction contract,
which was completed this year. The accounting records disclosed the following data for last
year:

Progress billings P1,650,000

Costs incurred 1,350,000
Collections 1,050,000
Estimated cost to complete 2,700,000

Required: P150,000
How much income should Navotas have recognized on this contract last year?

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 Cost incurred to date P1,350,000
Add: Estimated cost to complete 2,700,000
Total Cost P4,050,000

Percentage of Completion:
P1,350,000 ÷ P4,050,000 1/3

Revenue (P4,500,000 contract price x 1/3) P1,500,000

Less: Cost incurred (1,350,000)
Gross profit P150,000

3. Caloocan Construction, Inc. has consistently used the percentage-of-completion method of

recognizing income. During 2009, Caloocan started work on a P1,500,000 fixed-price
construction contract. The accounting records disclosed the following data for the year ended
December 31, 2009:

Costs incurred P 465,000

Estimated cost to complete 1,085,000
Progress billings 550,000
Collections 350,000

Required: P50,000
How much loss should Caloocan have recognized in 2009?

2009:
Cost incurred to date P465,000
Add: Estimated cost to complete 1,085,000
Total Cost P1,550,000

Revenue (contract price) P1,500,000

Less: Total cost (1,550,000)
Loss P(50,000)

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 4. Makati Construction Company uses the percentage-of-completion method of accounting. In
2009, Makati began work on a project which had a contract price of P1,600,000 and estimated
costs of P1,200,000. Additional information is as follows:

2009 2010

Costs incurred during the year P240,000 P1,060,000

Estimated costs to complete, as of 12/31/09 960,000
Billings during the year 290,000 1,310,000
Collections during the year 250,000 1,200,000

Required: P80,000
The amount of gross profit Makati should recognize on this contract during 2009 is

2009:
Cost incurred to date P240,000
Add: Estimated cost to complete 960,000
Total Cost P1,200,000

Percentage of Completion:
P240,000 ÷ P1,200,000 20%

Revenue (P1,600,000 contract price x 20%) P320,000

Less: Cost incurred (240,000)
Gross profit, 2009 P80,000

5. Pasig Construction Company uses the percentage-of-completion method for long-term

construction contracts. A specific job was begun in 2009 and completed in 2011. The contract
price was P1,400,000 and cost information as of each year-end is given below:

2009 2010 2011

End of year estimated cost to complete P400,000 P200,000 P0

Annual cost incurred 400,000 400,000 120,000

Required: P20,000
Assuming Pasig correctly recorded gross profit in 2009, how much gross profit should the
company record in 2010?

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 2009:
Cost incurred to date P400,000
Add: Estimated cost to complete 400,000
Total Cost P800,000

Percentage of Completion:
P400,000 ÷ P800,000 50%
2010:
Cost incurred to date P800,000
Add: Estimated cost to complete 200,000
Total Cost P1,000,000

Percentage of Completion:
P800,000 ÷ P1,000,000 80%

2009 2010 Year to Date

Revenue

2009:
Contract price x % of completion
P1,400,000 x 50% P700,000 P420,000 P1,120,000
(squeezed)
Year to Date:
Contract price x % of completion
P1,400,000 x 80%
Less: Cost incurred (400,000) (400,000) (800,000)
Gross Profit P300,000 P20,000 P320,000

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