LTCC

1. MM has entered into a very profitable fixed-price contract for constructing a high-rise apartment building over a
period of 2 years. It incurs the ff. costs relating to the contract during the first year:
Material Cost 5,000,000
Labor Cost (site) 4,000,000
Agreed admin cost as per contract to be reimbursed by the costumer 2,000,000
Depreciation of the plant use for construction 1,000,000
Marketing Cost (for selling apartments when they are ready) 2,000,000
Total estimated cost of the project 36,000,000
POC of the project at year end ____________________
2. MM received a contract to construct a bridge between Mindoro and Batangas. The project is expected to take 3 years
to complete. MM has signed a fixed price contract of 120,000,000 for the construction of this bridge. The details of the
costs incurred to date in 2026 are:
Labor Cost (site) 10,000,000
Construction Materials 30,000,000
Dep. Of special equipment used in construction 5,000,000
Other expenses used to get right exposure for the bridge 10,000,000
Needed cost to complete the bridge 55,000,000
Required:
Revenue ___________ Cost ______________ RGP ________________
3. MM Co. signed an 8,000,000 contract to build an access trial over the Pasig River. The project was expected to take
approximately 3 years. The ff. information was collected for year 1, 2 and 3 for the project:

Cost incurred Additional Materials Additional Trail (in Additional

during the cost expected consumed and needed meters) trails to be
year to complete laid during the materials to constructed constructed to
the project year complete the during the complete the
project year project
Year 1 1,000,000 4,500,000 1,500 8,500 30,000 152,000

Year 2 1,500,000 2,800,000 3,000 5,200 75,000 82,000

Year 3 2,500,000 - 5,000 - 80,000 -

Compute: RGP in year 2 and 3 using the ff.: (use POC)

1. Efforts-expended method (laid trails)
2. Output measure method (trails in meter)
4. MM Co. began operations on Jan. 1, 2026. During the year, MM entered into a contract with JJ Co. to construct a
facility. At that time, MM estimated that it would take 5 years to complete the facility at total cost of 48,000,000. The
contract price is 58,000,000.
During 2026, MM incurred 12,500,000 in construction cost related to the project. Because of rising materials and labor
costs, the estimated cost to complete the contract at the end of 2026 is 37,500,000. JJ Co. was billed for and paid 30% of
the contract price in accordance with the contract agreement. It is further agreed that any cost incurred is expected to
be recoverable. Compute CIP (net) or PB (net) using POC and ZPM.
5. MM entered into a construction agreement in 2025 for a contract price of 9.6M. at the beginning of 2026, a change
order increase the initial contract price by 480,000. MM uses POC in recognition of revenue. In relation to the project,
the ff. data are obtained:
2025 2026
Cost incurred to date 4,920,000 8,640,000
Est. costs to complete 4,920,000 2,160,000
Billings made 5,280,000 8,520,000
Collection made 4,380,000 7,500,000
RGP/(loss) should MM recognize in 2026 ______________________
6. On Jan. 1, 2025, a contractor enters into a construction contract which includes a fixed contract price of 120M to
build a bridge. The contractor’s initial estimate of contract costs is 80M over a 3 year construction period. The contractor
has a Dec. 31 year end.
On Dec. 31, 2025, the contractor’s estimate of total contract cost is still 80M. However, by the end of 2026, the
estimated contract costs increased to 100M, excluding the variations below:
*In 2026, the customer and the contractor agree to a variation resulting in an increase of contract revenue of
20M and estimated contract cost of 15M.
Actual cumulative costs incurred to the end of 2025, 2026, and 2027 (contract end) including the cost of variation are
30M, 71.05M, and 100.050M respectively.
At the end of 2025, 2026, and 2027 the customer paid the contractor PBs of 50M, 30M, and 42M respectively. Using
POC, determine the RGP/(loss) for 2025, 2026, and 2027.