Problem 1

XY Constructions began construction work under a three year contract. The contract price was P700,000.
XY uses the percentage of completion method for financial accounting purposes. The financial statement
presentation relating to this contract at December 31, 2030 is presented below:
Balance sheet
Accounts Receivable - construction billings 26,250
Construction in progress 87,500
Contract billings 82,250
Income Statement
Income (before tax) on the contract recognized in 203017,500
How much is the total estimated cost?

Problem 2
Lim Construction was recently awarded a P6,730,000 contract to construct a trade center for Ayala Inc.
Lim Construction estimates it will take 46 months to complete the contract. The company uses the
percentage of completion method to estimate profits.
The following information details the actual and estimated costs for the year 2027-2030:
Year Actual Cost each Year Estimated Cost to Complete
2027 3120000 3264000
28 1584000 1800000
29 1152000 912000
30 1080000 0

How much is the balance of CIP as of 2029?

Problem 3
Macapinlac, Inc. works on a P10,500,000 contract in 2023 to construct an office building. During 2023,
Macapinlac, Inc. uses the cost to cost method. At December 31, 2023, the balances in certain accounts
were: Construction in progress - P3,780,000; accounts receivable - P360,000; and billings on construction
in process P1,800,000; contract retention - P180,000; mobilization fee P140,000. At December 31, 2023,
the estimated cost at completion is P7,350,000. How much is the realized gross profit in 2023?

Problem 4:
DMCI entered into a fixed price contract for the construction of a road for Camella Corp. DMCI determines
the stage of completion of construction contracts using the percentage of completion "cost to cost
method". The total estimated cost to complete the contract is P75 million. The following were the total
actual costs incurred by DMCI during the first year of the construction:
• Research and development costs for which reimbursement is not specified in the contract -
1000000
• Cost of negotiating the contract (charge immediately as expense) - 500000
• Marketing costs - 150000
• Costs of hiring equipment - 700000
• Costs of materials purchased but not yet used in construction - 2500000
• Costs of materials used in construction - 15000000
• Costs of moving plant, equipment and materials to and from the contract site - 200000
• Administrative costs not expected to be reimbursed. - 100000
• Depreciation of equipment used in construction - 600000
• Depreciation of idle construction equipment - 300000
• Site labor costs - 5000000
• Site supervision costs. – 1000000
 How much is the cost incurred to date?
What is the percentage of completion of the contract at the end of first year?

Problem 5
Chen Corp. uses the cost to cost method to account for its construction contracts. The contract price of
the project is P1,800,000. Chen Corp, estimates that it will take 36 months to complete the contract. The
following information for its construction contract is presented below:
2021 2022 2023
Cost incurred to date 400000 1260000 ?
Realized Gross profit 50000 310000 80000
for the current year

What is the percentage of completion rate in the year 2021?

What is the total estimated cost to complete in 2023?
What is the percentage of completion rate in 2022?
What is the estimated cost to complete in 2021?

Problem 6
Santiago Builders began contrition work in 2030 for a project with contract price of P24,000,000. Santiago
Builders uses percentage of completion. The financial statements for 2030 relating to the contract show
the following:

Accounts Receivable 1,500,000

Construction in Progress 4,800,000
Contract Billings to date 4,500,000
Realized Gross in 2030 600,000

What is the total cost incurred to date for the year 2030?
How much is the cash collection for 2030?

Problem 7
On January 2, 2030, Manuela Corp. enters into a construction contact with Mr. Manny. The performance
obligation in the contract will be satisfied overtime. Manuela uses a percentage of completion "cost to cost
method" in measuring progress of the construction. The total estimated cost to complete is P25,000,000.
In 2030, Manuela incurred a total cost of P9,500,000, which includes P1,000,000 advance payment to
subcontractor. However, the subcontracted work has not yet been started. Also P500,000 cost of
materials not yet used in the construction. What is the percentage of completion rate?

Problem 8
Mansfield Inc. has consistently used the percentage of completion method On January 1, 2030, it began
constructing a work on a P6,000,000 project. At the inception date, the estimated cost of construction was
P4,500,000. The following data relate to the progress of the contract:

Income recognized at December 31, 2030 - 600,000

Cost incurred Jan. 1, 2031 through December 31, 2031 - 3,600,000
Estimated Cost to Complete at December 31, 2031 - 1,200,000

How much income should Mansfield recognize for the year ended 12/31/2031?
Problem 9
On January 1, 2016 a contractor enters into a construction contract which includes a fixed contract price
of P144,000 to build a bridge

The contract has a December 31 year-end.

On December 31, 2016 the contractor's estimate of the total contract is still P96,000. However, by the end
of 2017 the contractor's estimate of contract cost increased to P120,000, excluding the variation below.

In 2017 the customer and the contractor agree to a variation resulting in an increase in contract revenue
of P2,400 and estimated additional contract costs of P1,800.

Actual cumulative costs incurred to the end of 2016, 2017 and 2018 (the end of the contract) including the
costs of the variation are P36,000, P85,260 and P120,600 respectively.

At the end of 2016, 2017 and 2018 the customer paid the contractor progress billings of P60,000;
P36,000 and P48,000 respectively. The contractor determines the stage of completion of the contract
costs incurred for a work performed to date bear to the latest estimated total contract costs.

Determine the profit/loss for each year.

Using the same information, compute the gross amount due from/to customers for contract work.

Problem 10
On January 2, 2020 Vista Corp enters into a contract with a customer for the construction of building. The
contract price is P30,000,000. The parties also agreed that, when the building is complete, it will be
inspected and assigned a green building certification level. If the building achieves the certification level
specified in the contract, Vista will be entitled to an incentive payment of P2,500,000. Vista uses the
percentage of completion method in measuring its progress on the contract.

At contract inception, the entity cannot conclude that it is highly probable that a significant reversal in the
amount of cumulative revenue recognized will not occur with respect to the inclusion of the incentive
payment to contract price due to bad weather conditions, it does not expect that it can finish the building
on time for it to be entitled to the incentive payments. The estimated costs to complete in year 2020 are
P12,000,000. As of December 31, 2020, it incurs total costs of P6,750,000.

In 2021, it incurs total costs of P11,300,000. Due to good weather conditions, it now expects that it can
finish the building on time for it to be entitled to the incentive payments. It expects that it is highly probable
that a significant reversal in the amount of cumulative revenue recognized will not occur when the
uncertainty associated with the variable consideration is subsequently resolved. The estimated costs to
complete as of the end of 2020 are P950,000.

What is the total realized gross profit in the year 2020?

What is the total realized gross profit in the year 2021?