1.

In 2017, KABAYO KA Company agreed to construct a commercial building at a price of

₱1,000,000. KABAYO KA uses percentage of completion method of recognizing revenue on long
term construction construct. Data related to the project from 2017 to 2019 are as follows:

2017 2018 2019

Cost incurred each year 280,000 320,000 185,000
Estimated cost to complete 520,000 200,000 -
Billings to date 150,000 400,000 1,000,000
Collections of Billings to date 120,000 320,000 940,000

2017 2018 2019

A Contract Price 1 1 1
B Cost incurred to date 280,000 320,000+280=600 185+320+280=785
C Estimated cost to complete 520,000 200 -
D Total estimated Cost (B+C) 800 800 785
E Total estimated Gross Profit (A-D) 200 200 215
F Percentage of completion (B/D) 35% 75% 100%
g to date 70 150 215
h prior - 70 150
I current 70 80 65
j CIP (H+B<old year) - 350

To be
Recognized in
AMOUNT POC To date recognized in
prior year
current year
2017
Revenue 1000 350 - 350
Cost 800 280 - 280
Gross Profit 200 70 - 70
2018
Revenue 1000 750 350 400
Cost 800 600 280 320
Gross Profit 200 150 70 80
2019
Revenue 1000 1000 400+350 250
Cost 785 785 320+280 185
Gross Profit 215 215 80+70 65

To be
Recognized in
AMOUNT POC To date recognized in
prior year
current year
2017
Revenue 1000 350 - 350
 Cost 800 280 - 280
Gross Profit 200 - - -
2018
Revenue 1000 750 350 400
Cost 800 600 280 320
Gross Profit 200 150 - 150
2019
Revenue 1000 1000 400+350 250
Cost 785 785 320+280 185
Gross Profit 215 215 80+70 65

1. What is the amount of gross profit to be recognized in 2018?

2. Using the data in number 1, what is the balance of CIP net of Billings on December 31, 2018?

3. Using the data in number 1, assuming the company uses the zero profit of recognizing revenue,
what is the balance of CIP net of Billings as of December 31, 2018?

4. COOKING NG INA MO recognizes construction revenue and expenses using POC method. During
2018, a single long-term project has begun and continued through 2019. Details are as follows:

2018 2019
Receivable from construction contract 100,000 300,000
Construction expenses 105,000 192,000
Construction in progress 122,000 364,000
Billings on contracts 100,000 420,000
How much is the profit recognized in 2019?

5. WHOLSHEET SALES Co. which began its appliance business on January 2, 2016 reports the
following information related to installment sales:

2016 2017 2018

Installment Sales 360,000 375,000 450,000
Installment COGS 270,000 271,875 324,000
Collections:
2016 Installment Sales 67,500 112,500 108,750
2017 Installment Sales 71,250 120,000
2018 Installment Sales 93,750
Defaults:
Unpaid balance from 2016 sales 18,750 22,500
Value assigned to repossessed items 9,750 9,000
Unpaid balance from 2017 sales 24,000
Value assigned to repossessed items 13,500
 How much is the RGP from collections during 2018?

6. Using the data in number 5, how much is the loss on repossession during 2018?

7. On October 31, 2019, NALUGI Inc.’s trustee prepares a Statement of Affairs with the following
information:

a. 77,000 cash will be received by unsecured creditors whose claims total 140,000.

b. Mr. X, the janitor of the company has a claim of 2,625.

c. NALUGI Inc. issued to BV a 12%, 1yr note of 17,500 on January 1, 2019, nothing has been
pledged to this note.
d. JK holds a note of 26,250 on which interest of 787.50 is accrued, equipment with book value
of 24,000 has been pledged on this note. Market value of the equipment is 28,875.
e. RG received a 10% note of 21,000 from NALUGI Inc. on February 1, 2019, pledged with
equipment with a market value of 17,500.

How much will be received by RG, JK, Mr. X and BV respectively?

ANSWERS:

1. 80,000
2. 350,000
3. 200,000
4. 50,000
5. 86,437.50
6. 11,775
7. (BV 10,585.50) (RG 20,291.25) (JK 27,037.50) (MR. X 2,625)