AC 3101 - LTCC

Problem 1
The following data related to a construction job started by Lucio Inc.
Total contract price P1,000,000
Actual cost incurred in 2021 200,000
Estimated remaining costs 400,000
Billings to customers in 2021 300,000
Collections from customers in 2021 100,000

1. How much gross profit to be recognized by Lucio, Inc. using Percentage of Completion method?
2. How much is the contract asset or liability in 2021?
Lucio Construction Company began a construction project on a building for P3,000,000. The project was completed
during 2021. The accounting records disclosed the following:
2020 2021
Progress billings during the year P1,000,000 P1,900,000
Cost incurred during the year 900,000 1,800,000
Collections on billings during the year 700,000 2,300,000
Estimated cost to complete 1,800,000 0

3. What is the balance of construction in progress account at the end of 2020 using Percentage of completion?
4. What is the balance of construction in progress account at the end of 2020 using Zero Profit method?
Problem 2
The Lucio Construction company began to work on a contract in 2020 and completed the contract in 2021. The total
contract price was P4,200,000. Information concerning the contract for 2020 and 2021 is as follows:
2020 2021
Cost incurred during year P600,000 P3,150,000
Estimated cost to complete at end of year 2,400,000 0
Billings during year 720,000 3,280,000
Collections during year 400,000 3,000,000
Under the percentage-of-completion method, what amount of the P4,200,000 contract price is to be recognized as
income in:
5. Year 2020?
6. Year 2021?
7. The Contract asset/liability in year 2020?
Problem 3
Lucio Construction Co. has used the cost-to-cost percentage-of-completion method of recognizing revenue, Johnny
Sins assumed the presidency of the company after the death of his father, Junjun. In reviewing the records, Johnny
finds the following information regarding a recently completed building project for which the total contract was
P2,000,000.
2019 2020 2021
Gross profit (loss) P40,000 P140,000 P(20,000)
Cost incurred each year 360,000 ? 820,000

Johnny wants to know how effectively the company operated during the three (3) years on this project and, since
the information is not complete, has asked for answers to the following questions:
8. How much cost was incurred in 2020?
9. What percentage of the project was completed by the end of 2020?
10. What was the total estimated gross profit on the project by the end of 2020?
11. What was the estimated cost of complete the project at the end of 2020?
Problem 4
Lucio Construction Company began operation on January 2, 2021. During the year, the company entered into a
contract with Debil Company to construct a manufacturing facility. At that time, Lucio estimated that it would take

Lucio
AC 3101 - LTCC
five years to complete the facility at a total cost of P1,800,000. The total contract price for the construction of the
facility is P2,500,000. During the year, the company incurred P440,000 in construction cost related to the
construction project. The estimated cost to complete the contract is P1,560,000. Debil Company was billed and paid
30% of the contract price subject to a 10% retention.
12. Using the percentage of completion method, how much is contract asset/liability?
Problem 5
On January 15, 2019, Lucio Builders, Inc. won a bidding to build an athletic stadium. The project was to be built at a
total cost of P5,500,000 and was scheduled for completion by September 1, 2021. One clause of the contract stated
that Lucio Builders, Inc. was to deduct P15,000 from the P6,600,000 bid price for each week that completion was
delayed. Completion was delayed six weeks.
Data for the three-year construction period follows:
2019 2020 2021
Cost incurred each year P1,782,000 P2,068,000 P1,650,000
Estimated cost to complete 3,618,000 1,650,000 0
Contract billings each year 1,200,000 1,900,000 ?
Cash collections each year 1,000,000 1,800,000 3,710,000
Operating expenses 100,000 90,000 70,000

13. What is the net income for the year 2020, using the percentage of completion method?
14. Using the percentage of completion method, what is the balance of the Construction in Progress account net
of billings at December 31, 2020?
15. Under the Zero profit method, what is the balance of the Construction in Progress account net of contract
billings as of December 31, 2020?
Problem 6
Lucio Construction Company has two construction projects which commenced in 2021. Data for the two projects are
as follows:
Project 1 Project 2
Contract price P420,000 P150,000
Cost incurred during 2021 120,000 140,000
Estimated cost to complete 60,000 35,000
Progress billings during 2021 125,000 145,000
Collections during 2021 120,000 140,000
Expenses 10,000 5,000

16. Using the percentage of completion method, what is the net income (loss) for the year ended December 31,
2021?
17. Under the zero profit method, what is the net income (loss) for the year ended December 31, 2021?
Problem 7
Lucio Corporation begun construction work in 2021 for a project with a contract price of P8,000,000. Lucio
Corporation uses the percentage of completion method. The financial statements for 2021 relating to the contract
shows the following:
Accounts receivable P500,000
Construction in progress 1,600,000
Progress billing to date 1,500,000
Gross profit earned in 2021 200,000

Compute the following for the year 2021:

18. Cash collections
19. Cost incurred to date

Lucio