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Practical Accounting 2 LONG-TERM Construction Contracts
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1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS
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Monday, July 20, 2015 About Me
Accounting 2012
LONG-TERM CONSTRUCTION CONTRACTS
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▼ 2015 (16)
In accounting for long-term construction contracts (those taking longer than one year to complete), the two
methods commonly followed are percentage-of-completion and completed-contract. ►
► September (2)
(a) The revenue recognized on a long-term construction contract under the percentage-of-completion method is ▼
▼ July (10)
determined by applying a percentage representing the degree of completion to the total contract price at the INSTALLMENT SALES
end of the accounting period. The percentage may be derived by dividing the costs incurred to date by the
LONG-TERM CONSTRUCTION
total estimated costs of the entire contract based on the most recent information. The revenue so derived is CONTRACTS
then reduced by the direct contract costs to determine the gross profit recognized in the initial period.
TOA3
In subsequent periods, since the percentage-of-completion method described produces cumulative results,
revenue and gross profit recognized in prior periods must be subtracted to obtain current revenue and gross TOA2
profit to be recognized. TOA1
Under the completed-contract method, no earnings are recognized until the contract is substantially STANDARD COSTING - Variance
completed. For the period in which completion occurs, gross revenues include the total contract price. Total Analysis
job costs incurred are deducted from gross revenues, resulting in recognition of the entire amount of gross ABC and STANDARD COSTING
profit in the completion period. If it is expected that a loss will occur on the contract, a provision for loss
LINK: PROCESS COSTING, FOREX
should be recognized immediately under both the completed-contract method and the percentage-of-
AND HEDGING, and MAS ...
completion method.
(b) The percentage-of-completion method should be used when estimates of the bases upon which progress is Joint Products Cost
measured are reasonably dependable and all the following conditions exist: Just In Time
1. The contract clearly specifies the enforceable rights regarding goods or services to be provided and
received by the parties, the consideration to be exchanged, and the manner and terms of settlement. ►
► June (4)
2. The buyer can be expected to satisfy all obligations under the contract.
3. The contractor can be expected to perform the contractual obligation.
The completed-contract method should be used when inherent hazards or lack of dependable estimates cause
the forecasts to be of doubtful value.
(c) Under the percentage-of-completion method, a schedule is made of the contracts in process, showing the
total costs incurred as of the end of a given period, the estimated gross profit recognized based on the
degree of completion, and the total billings rendered on each individual contract. If costs incurred plus
recognized profits exceed the related billings on a contract, this net figure is shown as a current asset. This
treatment shows that the contractor has not fully billed the customer for work performed to date and has a
claim against the customer for that portion of work completed but not yet billed. If billings on a contract
exceed costs incurred plus estimated profits, this net figure is shown as a current liability, which means that
the contractor has overbilled the customer for work done to date and must complete the work represented
by the excess billings.
Under the completed-contract method, the treatment of excess costs and billings is the same as under the
percentage-of-completion method except that estimated profits are not computed because profit recognition
is deferred until a contract is completed. The excess of costs over related billings on a contract is a current
asset while the excess of billings over related costs on a contract is a current liability.
PROBLEM 1
Waya Construction Co. has used the cost to cost percentage of completion method of recognizing profits.
Lia Ortega assumes leadership of the business after the retirement of her mother Lyca. In reviewing the
records, Lia finds the following information regarding a recently completed building project for which the
total contract was P500,000.
2009 2010 2011
Gross Profit (loss) P10,000 P35,000 P(5,000)
Cost incurred/year 90,000 ? P205,000
Lia wants to know how effectively the company operated during the last three years on this project and,
since the information is not complete, has asked you to help by answering the following questions
a. How much cost was incurred in 2010?
b. What percentage of the project was completed by the end of 2010?
c. What was the total estimated gross profit on the project by the end of 2010?
d. What was the estimated cost to complete the project at the end of 2010?
e. What percentage of the project was completed by the end of 2009?
PROBLEM 2
udmbsa51.blogspot.com/2015/07/long-term-construction-contracts.html 1/13
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In 2009, Golden Engineering entered into an agreement to construct an office building at a contract price of
P5,100,000. Construction data were as follows:
2009 2010 2011

Construction costs P 750,000 P2,700,000 P 630,000
incurred
Estimated costs to 3,000,000 862,500 --
complete
Progress billings 570,000 3,600,000 930,000
Collections from client 450,000 3,300,000 1,350,000
Prepare the necessary entries for each year, assuming the firm uses the:
(1) completed-contract method

(2) percentage-of-completion method.
PROBLEM 3
Solidrock Construction contracted to build a ship over a two year period. The contract price was
P21,000,000 with an estimate total cost of P18,400,000. The following cost data relate to the construction
period.
Costs Incurred Estimated Cost Cash

Year in Year to Complete Billings Collected
2009 P9,000,000 P10,000,000 P11,000,000 P7,500,000
2010 9,500,000 0 8,000,000 9,000,000
2011 0 0 2,000,000 4,500,000
Prepare the necessary journal entries for 2009, 2010, and 2011 assuming Solidrock uses the percentage-of-
completion method.
PROBLEM 4
Sealand Construction entered into a contract to construct a floating bridge across a lake. The contract price
for the bridge is P7,500,000. During 2009, costs of P1,800,000 were incurred representing 30% of total
expected costs.
Prepare the necessary entries for 2009 to recognize gross profit for the year assuming the firm uses the
(1) completed-contract method.

(2) percentage-of-completion method.
PROBLEM 5
. In 2009, Mandaluyong Builders began construction work under a three-year contract at a price of
P7,525,000. The firm uses the percentage-of-completion method for financial accounting purposes. The
income to be recognized each year is based on the proportion of cost incurred to the total estimated costs
for completing the contract. The financial statement presentations relating to this contract on December 31,
2009, are:
Balance Sheet
Accounts receivable ........................ P150,500
Construction in progress ................... P602,000
Less progress billings ..................... 562,000 40,000
Income Statement
Gross profit on construction contracts ..... P301,000
Determine the
(1) cash collected in 2009.
(2) estimated income on the construction contract.
PROBLEM 6
On January 1, 2009, Jaguar Enterprises obtained a contract to construct a building. It was estimated at the
beginning of the contract that it would take three years to complete the project at an expected cost of
P200,000. The contract price was P250,000. The following information describes the status of the job at the
close of production each year:
2009 2010 2011

Actual costs incurred ........... P110,000 P120,000 P15,000
Estimated costs to complete ..... 100,000 20,000 0
Billings on contract ............ 125,000 125,000 0
Collections on contract ......... 120,000 120,000 10,000
Compute the items listed below for each year assuming the use of the percentage-of-completion cost-to-
cost method. (Round all percentages to two decimals).
2009 2010 2011

1. Revenue recognized during the
year ..........................
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2. Gross profit recognized during

the year ......................
3. Balance in the construction in

progress account at December 31
(after closing entries) .......
4. Balance in the progress billings

account at December 31 (after
closing entries) ..............
PROBLEM 7
On January 1, 2009, Boston Inc. obtained a contract to construct a building. It was estimated at the
beginning of the contract that it would take 3 years to complete the project at an expected cost of P200,000.
The contract price was P250,000. The following information describes the status of the job at the close of
production each year:
2009 2010 2011

Actual costs incurred ............ P150,000 P100,000 P15,000
Estimated costs to complete ...... 90,000 20,000 0
Billings on contract ............. 110,000 120,000 20,000
Collections on contract .......... 100,000 120,000 30,000
Compute the items listed below for each year assuming the use of the percentage-of- completion cost-to-
cost method. (Round all percentages to two decimals.)
2009 2010 2011

1. Construction costs (expense)
recognized during the year ....
2. Gross profit recognized during
the year ......................
3. Balance in the construction in
progress account at Dec. 31
(after closing entries) .......
4. Balance in accounts receivable
at Dec. 31 (after closing
entries) ......................
Multiple Choice Identify the choice that best completes the statement or answers the question.
____ 1. How should the balances of Progress Billings and Construction in Progress be shown at reporting dates prior
to the completion of a long-term contract?
a. Progress Billings as income, Construction in Progress as inventory.
b. Net, as income from construction if credit balance, and loss from construction if debit balance.
c. Progress Billings as deferred income, Construction in Progress as a current asset.
d. Net, as a current asset if debit balance and current liability if credit balance.
____ 2. If the percentage-of-completion method is used, what is the basis for determining the gross profit to be
recognized in the second year of a three-year contract?
a. Cumulative actual costs incurred only.
b. Incremental cost for the second year only.
c. Cumulative actual costs and estimated costs to complete.
d. No gross profit would be recognized in year 2.
____ 3.. If the completed-contract method is used, what is the basis for determining the income to be recognized in the
second year of a three-year contract?
a. Cumulative actual costs incurred only.

b. Incremental cost for the second year only.
c. Latest available estimated costs.
d. No income would be recognized in year 2.
____ 4. Which of the following would be used in the calculation of the gross profit recognized in the third and final
year of a construction contract that is accounted for using the percentage-of-completion method?
Actual Income
Contract Total Previously
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Price Costs Recognized
a. Yes Yes No
b. Yes Yes Yes
c. Yes No Yes
d. No Yes Yes
____ 5. Assume the percentage-of-completion method of revenue recognition is used on a long-term construction
contract. Under this method, revenues that are earned but unbilled at the balance sheet date should be
disclosed
a. as a long-term receivable in the noncurrent assets section of the balance sheet.
b. only as a footnote disclosure until the customer is billed for the percentage of work completed.
c. as construction in progress in the current assets section of the balance sheet.
d. as construction in progress in the noncurrent assets section of the balance sheet.
____ 6. The completed-contract method of accounting for long-term construction-type contracts is preferable when
a. a contractor is involved in numerous projects.
b. the contracts are of a relatively long duration.
c. estimates of costs to complete and extent of progress toward completion are reasonably dependable.
d. there are inherent uncertainties in the contract beyond normal business risks.
____ 7. Which of the following is not a difference between the percentage-of completion and completed-contract
methods of accounting for long-term construction contracts?
a. They report different amounts for inventory during the construction period.
b. They report different amounts for progress billings during the construction period.
c. They cause a different cash inflow during the construction period.
d. They report different amounts for accounts receivable during the construction period.
____ 8. The theoretical support for using the percentage-of-completion method of accounting for long-term
construction projects is that it
a. is more conservative than the completed-contract method.
b. reports a lower Net Income figure than the completed-contract method.
c. more closely conforms to the cost principle.
d. produces a realistic matching of expenses with revenues.
____ 9. If a company uses the completed-contract method of accounting for long-term construction contracts, then
during the period of construction, financial information related to a long-term contract will
a. appear on both the income statement and balance sheet during the construction period.
b. appear only on the income statement during the period of construction.
c. appear only on the balance sheet during the period of construction.
d. not appear on the financial statements.
____ 10. When the percentage-of-completion method of accounting for long-term construction projects is used, why is
Construction in Progress increased by the annual recognized gross profit on long-term construction
contracts?
a. The cost of the contract has increased.
b. The project's value has increased above cost.
c. The economy experiences inflation over the construction period.
d. Construction in Progress is not increased by the annual recognized profit.
____ 11. When comparing the percentage-of-completion and completed-contract methods of accounting for long-term
construction contracts, both methods will report
a. the same balances each period in the Progress Billings account.
b. the same expense for cost of construction each year.
c. the same amount of income in the year of completion.
d. the same inventory carrying value each year during the construction period.
____ 12. A company uses the percentage-of-completion method to account for a four year construction contract.
Progress billings sent in the second year that were collected in the third year would
a. be included in the calculation of the income recognized in the second year.
b. be included in the calculation of the income recognized in the third year.
c. be included in the calculation of the income recognized in the fourth year.
d. not be included in the calculation of the income recognized in any year.
____ 13. In accounting for a long-term construction contract for which there is a projected profit, the balance in the
Construction in Progress account at the end of the first year of work using the percentage-of-completion
method would be
a. zero.
b. the same as the completed-contract method.
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c. higher than the completed-contract method.
d. lower than the completed-contract method.
____ 14. 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
What is the amount of contract costs incurred during the year ended December 31, 2010?
a. P600,000
b. P960,000
c. P990,000
d. P1,440,000
____ 15. 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
How much income should avotas have recognized on this contract last year?
a. P105,000
b. P150,000
c. P300,000
d. P350,000
____ 16. 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
How much loss should Caloocan have recognized in 2009?
a. P15,000
b. P35,000
c. P50,000
d. P115,000
____ 17. Pasay Construction Company has consistently used the percentage-of- completion method. On January 10,
2009, Pasay began work on a P3,000,000 construction contract. At the inception date, the estimated cost of
construction was P2,250,000. The following data relate to the progress of the contract:
Gross profit recognized at December 31, 2009 .......... P 300,000

Costs incurred Jan. 10, 2009, through Dec. 31, 2010 ... 1,800,000
Estimated cost to complete at December 31, 2010 ....... 600,000
How much gross profit should Pasay recognize for the year ended December 31, 2010?
a. P150,000
b. P262,500
c. P300,000
d. P450,000
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____ 18. For a construction firm using the completed-contract method, if costs exceed billings on some contracts by
P1,000,000 and billings exceed costs by P800,000 on others, the contracts should ordinarily be reported as
a
a. current asset of P200,000.
b. current liability of P200,000.
c. current asset of P1,000,000 less a contra-current asset of P800,000.
d. current asset of P1,000,000 and a current liability of P800,000.
____ 19. 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 960,000
12/31/09 ................................
Billings during the year .................. 290,000 1,310,000
Collections during the year ............... 250,000 1,200,000
The amount of gross profit Makati should recognize on this contract during 2009 is
a. P40,000.
b. P80,000.
c. P100,000.
d. P200,000.
____ 20. 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 P 0
Annual cost incurred ............ 400,000 400,000 120,000
Assuming Pasig correctly recorded gross profit in 2009, how much gross profit should the company record
in 2010?
a. P0
b. P20,000
c. P300,000
d. P320,000
The following data relate to a construction job started by Valenzuela Co. during 2009:
Total contract price .................................. P300,000

Actual costs incurred during 2009 ..................... 60,000
Estimated remaining costs ............................. 120,000
Billed to customer during 2009 ........................ 90,000
Received from customer during 2010 .................... 30,000
____ 21.Under the completed-contract method, how much should Valenzuela recognize as gross profit for 2009?
a. P0
b. P30,000
c. P40,000
d. P90,000
____ 22. Under the percentage-of-completion method, how much should Valenzuela recognize as gross profit for 2009?
a. P0
b. P40,000
c. P80,000
d. P100,000
____ 23. Violet Construction Company uses the percentage-of-completion method for long-term construction
contracts. The company started a project with a contract price of P2,750 in 2009. Given the following data,
what is the balance in Construction in Progress for this contract at the end of 2009?
2009 2010
Costs incurred this year .................. P 400 P 500
Total estimated costs remaining at end
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of year ................................. 1,600 1,000
a. P150
b. P400
c. P550
d. P1,750
____ 24. Silver Construction Company uses the percentage-of-completion method for long-term construction contracts.
The company has a project with a contract price of P7,000 on which P600 of gross profit has been
recognized in prior years. Information for the current year is as follows:
Total cost incurred through current year ............... P5,000

Estimated costs remaining at end of current year ....... 2,800
What is the loss that Silver should recognize in the current year?
a. P600
b. P800
c. P1,400
d. No loss should be recognized.
____ 25. In 2009, Konstrak Corp. began construction work under a three-year contract. The contract price is P800,000.
Konstrak used the percentage-of-completion method for financial accounting purposes. The income to be
recognized each year is based on the proportion of costs incurred to total estimated costs for completing the
contract. The financial presentations relating to this contract at December 31, 2009, appear below.
Balance Sheet
Accounts receivable--construction contract
billings .................................. P15,000
Construction in progress .................... P50,000
Less contract billings ...................... (47,000)
Cost of uncompleted contract in excess of
billings .................................. 3,000
Income Statement
Income (before tax) on the contract
recognized in year 1 ...................... P10,000
How much cash was collected in 2009 on this contract?
a. P32,000
b. P35,000
c. P47,000
d. P50,000
Answers MULTIPLE CHOICE
1. D
2. C
3. D
4. B
5. C
6. D
7. C
8. D
9. C
10. B
11. A
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12. D
13. C
14. C
15. B
16. C
17. A
18. D
19. B
20. B
21. A
22. B
23. C
24. C
25. A
PROBLEM 2
(1)
2009
Construction in Progress 750,000
....................
Materials, Cash, etc. 750,000
.....................
Accounts Receivable 570,000

.........................
Progress Billings on Construction 570,000
Contracts
Cash 450,000
........................................
.......................
2010
Construction in Progress 2,700,000
....................
Materials, Cash, etc. 2,700,000
.....................
Accounts Receivable 3,600,000

.........................
Progress Billings on Construction 3,600,000
Contracts
Cash 3,300,000
........................................
.......................
2011
....................
.....................

.........................
Contracts
Cash 1,350,000
........................................
.......................
Progress Billings on Construction Contracts 5,100,000
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.
Revenue from Long-Term Construction
Contracts 5,100,000
.................................
Cost of Long-Term Construction Contracts 4,080,000

....
..................
(2)
2009
....................
.....................

.........................
Contracts
Cash 450,000
........................................
.......................
Cost of Long-Term Construction Contracts 750,000

....
....................
Contracts 1,020,000
.................................
2010
....................
.....................

.........................
Contracts
Cash 3,300,000
........................................
.......................

....
....................
Contracts 3,060,000
.................................
2011
....................
.....................

.........................
Contracts
Cash 1,350,000
........................................
.......................
Cost of Long-Term Construction Contracts 630,000

....
....................
Contracts 1,020,000
.................................

.
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..................
PROBLEM 3
2009
....................
.....................

.........................
Contracts
Cash 7,500,000
........................................
.......................

....
Construction in Progress
(P9,000,000 / P19,000,000) ´ P2,000,000 947,368
...
Contracts 9,947,368
.................................
2010
....................
.....................

.........................
Contracts
Cash 9,000,000
........................................
.......................

....
Construction in Progress (P21,000,000 -
P18,500,000 total costs) - P947,368 1,552,632
........
Contracts 11,052,632
.................................
2011
.........................
Contracts
Cash 4,500,000
........................................
.......................

.
..................
PROBLEM 4
(1)
Using the completed-contract method, no gross profit is recognized on the contract until the bridge is
completed. Thus, no entry is needed.
(2)

...
Construction in Progress 450,000 *
...................
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Contracts............................... 2,250,000
...
P1,800,000 / 30% = P6,000,000
P7,500,000 - P6,000,000 = P1,500,000
P1,500,000 ´ 30% = P450,000
PROBLEM 5
(1)
Progress billings on construction contract ............ P562,000
Less accounts receivable .............................. 150,500
Cash collected in 2009 ................................ P411,500
(2)
Gross profit from construction contract + Construction in progress =
Revenue for 2009
P301,000 + P602,000 = P903,000
P903,000/P7,525,000 = 12% Percentage completed in 2009
P301,000/.12 = P2,508,333 Estimated income on construction contract
PROBLEM 6
2009 2010 2011

Contract price P250,000 P250,000 P250,000
...................
Current year costs 110,000 115,000 15,000
...............
Costs to date 110,000 225,000 240,000
....................
Estimated cost to complete 100,000 20,000 0
.......
Estimated total cost 210,000 245,000 240,000
.............
Estimated total gross profit 40,000 5,000 10,000
.....
Percent complete 52% 92% 100%

.................
Revenue to date P130,000 P230,000 P250,000
..................
To Date Previous Current
at Dec. 31 Years Year
2009: Revenue P130,000 P130,000
............
Costs 110,000 110,000
............
Gross profit P 20,000 P 20,000
............
2010: Revenue P230,000 P130,000 P100,000

............
Costs 225,000 110,000 115,000
............
Gross profit P 5,000 P 20,000 P(15,000)
............
2011: Revenue P250,000 P230,000 P 20,000

............
Costs 240,000 225,000 15,000
............
Gross profit P 10,000 P 5,000 P 5,000
............
2009 2010 2011
1. Revenue recognized during

the year P130,000 P100,000 P20,000
....................
2. Gross profit recognized
during 20,000 (15,000) 5,000
the year
....................
3. Balance in the construction
in 130,000 230,000 0
progress account at Dec.
31 .
4. Balance in the progress
billings account at Dec. 125,000 250,000 0
31 .
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PROBLEM 7
2009 2010 2011

Contract price P250,000 P250,000 P250,000
Current year costs 150,000 100,000 15,000
Costs to date 150,000 250,000 265,000
Estimated cost to complete 90,000 20,000 0
Estimated total cost 240,000 270,000 265,000
Estimated total gross profit 10,000 (20,000) (15,000)
Percent complete 63% 93% 100%
Revenue to date P157,500 P232,500 P250,000
To Date Previous Current

at Dec. 31 Years Year
2009: Revenue P157,500 P157,500
............
Costs 150,000 150,000
............
Gross profit P 7,500 P 7,500
............
2010: Revenue P232,500 P157,500 P 75,000

............
Costs 252,500 150,000 102,500
............
Gross profit P(20,000) P 7,500 P(27,500)
............
2011: Revenue P250,000 P232,500 P 17,500

............
Costs 265,000 252,500 12,500
............
Gross profit P(15,000) P(20,000) P 5,000
............
2009 2010 2011

1. Construction costs (expense)
recognized during the year P150,000 P102,500 P12,500
2. Gross profit recognized

during 7,500 (27,500) 5,000
the year
3. Balance in the construction

in
progress account at Dec. 31 157,500 230,000 0
(after closing entries)
4. Balance in accounts
receivable
at Dec. 31 (after closing 10,000 10,000 0
entries)
-END-
Posted by Accounting 2012 at 8:04 AM
5 comments:
Unknown July 28, 2016 at 7:35 AM
May i know what's your suggested computation for problem no. 1?

Reply
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Unknown June 21, 2020 at 7:39 PM
lOMoARcPSD|22035264

suggested answer for problem 1?
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lost until one fateful day when I met this friend of mine who recently secured a loan from a very
honest man Mr, Benjamin. She introduced me to this honest loan officer Mr, Benjamin who helped
me get a loan within 5 working days, I will forever be grateful to Mr Benjamin, for helping me get
back on my feet again. You can contact Mr Benjamin via email: 247officedept@gmail.com they
do not know I’m doing this for them, but i just have to do it because a lot of people are out there
who are in need of a loan assistance please come to this honest man and you can be save as
well .WhatsApp:(+1 989-394-3740)
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lOMoARcPSD|22035264

Practical Accounting 2 LONG-TERM Construction Contracts

Accountancy (Bulacan State University)

Studocu is not sponsored or endorsed by any college or university

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

Higit Pa Gumawa ng Blog Mag-sign in

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

2009 2010 2011

(1) completed-contract method

Costs Incurred Estimated Cost Cash

(1) completed-contract method.

2009 2010 2011

2009 2010 2011

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

2. Gross profit recognized during

3. Balance in the construction in

4. Balance in the progress billings

2009 2010 2011

2009 2010 2011

LONG-TERM CONSTRUCTION CONTRACTS

a. Cumulative actual costs incurred only.

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

Progress billings ..................................... P1,650,000

Costs incurred ........................................ P 465,000

How much loss should Caloocan have recognized in 2009?

Gross profit recognized at December 31, 2009 .......... P 300,000

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

2009 2010 2011

Total contract price .................................. P300,000

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

Total cost incurred through current year ............... P5,000

How much cash was collected in 2009 on this contract?

LONG-TERM CONSTRUCTION CONTRACTS

Answers MULTIPLE CHOICE

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

Accounts Receivable 570,000

Accounts Receivable 3,600,000

Accounts Receivable 930,000

Progress Billings on Construction Contracts 5,100,000

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

Cost of Long-Term Construction Contracts 4,080,000

Accounts Receivable 570,000

Cost of Long-Term Construction Contracts 750,000

Accounts Receivable 3,600,000

Cost of Long-Term Construction Contracts 2,700,000

Accounts Receivable 930,000

Cost of Long-Term Construction Contracts 630,000

Progress Billings on Construction Contracts 5,100,000

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

Accounts Receivable 11,000,000

Cost of Long-Term Construction Contracts 9,000,000

Accounts Receivable 8,000,000

Cost of Long-Term Construction Contracts 9,500,000

Progress Billings on Construction Contracts 21,000,000

Cost of Long-Term Construction Contracts 1,800,000

1/28/2021 PRACTICAL ACCOUNTING 2: LONG-TERM CONSTRUCTION CONTRACTS

2009 2010 2011

Percent complete 52% 92% 100%

2010: Revenue P230,000 P130,000 P100,000

2011: Revenue P250,000 P230,000 P 20,000

2009 2010 2011