D Company entered into a construction agreement in x4 for the rip- rapping of Pier 4. The original contract price was P9,600,000 but a change order was issued in x5 increasing the contract price by P480,000. D uses the percentage of completion method of revenue recognition on long-term construction contracts. The following information are obtained on the project of x4 and x5. Cost incurred to date Estimated costs to complete. Billings made Cash collections. x4 x5 a. (P960,000) b. (P480,000) P4,920,000 4,920,000 5,280,000 4,380,000 What is the gross profit (loss) of D on the project for x5? c. (P1,080,000) d. (P840,000) P8,640,000 2,160,000 8,520,000 -7,500,000

D Company entered into a construction agreement in x4 for the rip- rapping of Pier 4. The original contract price was P9,600,000 but a change order was issued in x5 increasing the contract price by P480,000. D uses the percentage of completion method of revenue recognition on long-term construction contracts. The following information are obtained on the project of x4 and x5. Cost incurred to date Estimated costs to complete. Billings made Cash collections. x4 x5 a. (P960,000) b. (P480,000) P4,920,000 4,920,000 5,280,000 4,380,000 What is the gross profit (loss) of D on the project for x5? c. (P1,080,000) d. (P840,000) P8,640,000 2,160,000 8,520,000 -7,500,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 18RE

See similar textbooks

Similar questions

contract. Information on the construction is shown below: in recognizing revenue and profit from the contract. In 20xl, Taste Construction Co. started work on a P5M fixed price Taste uses the percentage of completion method (based on costs) 20x1 20x2 1,425,000 4,040,000 3,325,000 1,010,000 20x3 Casts incurred to date 5,080,000 How much is the loss provision recognized in 20x2? a. 25,000 b. 15,000 c. 10,000 d. 5,000
ABC Co. estimates total contract costs at completion d In 20x2. ABC incurs actual costs of P2.45M and revizes its ABC completes the construction in 20x3 The actual total 6. In 20x1, ABC Co. enters into a contact with a customer for the uses the cost-to-cost method in measuring its progress on the estimate of total contract costs at completion to P4.6M. construction of a building. The contract price is P6M. ABC Co. me contract. cost of the contract is P4.5M. How much is the profit recognized in 20x3? a. 420,000 b. 450,000 c 500,000 d. 550,000
For a construction firm using the cost recovery 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 P1,000,000 and a current liability of P800,000 b. current asset of 200,000
1. In accounting for a long-term construction contracts, using percentage-of-completion (over time) method, the amount of construction in progress account: a. Is the same with the total revenue recognized. b. Is equal to the gross profit for the year plus the actual cost incurred. c. Total contract price multiplied by the percentage of completion. d. All of the choices 2. A franchisor, charges an initial franchise fee of P920,000, with P200,000 paid when the agreement is signed and the balance in five annual payments. The present value of the future payments, discounted at 10% is P545,872. Franchise operations already started and no future services are required to be performed. The amount of revenue from franchise fees is?
In 20Y5, Duncan Construction Company agreed to construct an apartment building at a price of $1,200,000. The information relating to the costs and billings for the contract is shown below. Cost incurred to date Est. cost yet to be incurred Customer billings to date Collections of billings to date 20Y5 $ 280,000 520,000 150,000 120,000 ● 20Y6 $ 600,000 200,000 500,000 320,000 20Y7 $ 785,000 0 1,200,000 940,000 • Prepare a schedule showing the profit to be recognized each year. Prepare all journal entries required for all years using the percentage of completion method. Prepare all journal entries required for all years using the completed contracts method.
Tyro Construction Company has two projects, for which it reported, as of December 31, 20x5, the following information: In thousand pesos: Project A Project B Contract Price P 4,800 860 20x4: Costs incurred P 3,400 Percent completed 75% 20x5: Costs incurred P 1,250 140 Percent Completed 25% 15% Using the percentage-of-completion (over time) method of revenue recognition, gross profit on Project A to be recognized in 20x4 would be: a. P 200,000 ] b. P 300,000
Egay Construction Corporation contracted with the province of Pampanga to construct a bridge at a contract price of P16,000,000. Egay Corporation expects to earn P1,520,000 on the contract. The percentage of completion method is to be used and the completion stage is to be determined by estimates made by the engineer. The following schedule 'summarizes the activities of the contract for years x0-x2. Estimate Cost to Cost Year Incurred х0 P4,600,000 4,500,000 5,250,000 xl x2 Engineer's Estimate of Complete P9,640,000 5,100,000 -0- x0 a. P545,600; b. P545,600; Billings Completion 31% 71 58% 100% 60 *A 10% retainer accounts for the difference collections. between billings and br Under the percentage of completion method, using the engineer's estimate as the measure of completion to be applied to revenues and costs, how much is the gross profit earned each year?id x1 x2 P 498,400; P 606,000 P1,044,000; c. P1,760,000; P6,400,000; d. P1,760,000; P1,800,000; Collection on Contract on Billings…
percentage-of-completion method of acCounting. At the end of 20x5, the following financial IX- Incomplete Data In 20x5, Chicago Construction began work on a three-year construUction project to buila performing arts complex (the "PAC"). The PAC contract price is P150 million. Chicago user ew percentage-of-completion method of accounting. At the end of 20x5, the following fingn statement information indicates the results to date for the PAC: Income Statement: Revenue. P ? million 35 million P ? million Cost of Construction Gross profit. Balance Sheet: Accounts Receivable from construction billings Construction in progress Less: Billings on construction. Net billings in excess of construction in progress. Cash Flow Statement Cash Collections. P 14 million P.50 million (P ? million) P ? million ... P 46 million .. Required: Compute the following, placing your answer in the spaces provided and showing supporting computations below: 1. Total revenue recognized during 20x5 2. Billings on…
BnD Construction Co. successfully tendered for a 3-year contract to erect some warehouse facilities in Gros Islet. The following information has been provided. Time left 2:20:2 Contract price - $25 000 000 2021 $ 4 000 000 Cast during year Estimated cost to complete Progress billings to date Cash collected to date Cast to date Estimated cost to complete Total estimated cost Percentage complete (Round to nearest whole number) Total contract price Total estimated cast i Complete the following Workings Schedule. Do not enter negative values in the schedule. Estimated gross profit or loss Revenue to recognize to date Less Revenue previously recognized Revenue to recognize in year Estimated gross profitto recognize to date 16 000 000 4 500 000 4 200 000 Less Gross profit or lass previously recognized 2022 2021 $8 000 000 8 050 000 11 500 000 11 000 000 2023 2022 $8 100 000 0 25 000 000 25 000 000 2023 %
For a construction firm using the cost recovery method, if costs exceed billings ons some contracts by 1,000,000 and billings exceed costs by 800,000 on others, the contracts should ordinarily be reported as a? a. current asset of 200,000 b. current liability of 200,000 c. current asset of 1,000,000 less a contra-current asset of 800,000 d. current asset of 1,000,000 and a current liability of 800,000
1. In 20x1, Electrified Construction Co. enters into a contract to construct a building for a customer. Electrified identifies its performance obligation to be satisfied over time. Electrified measures its progress on the contract based on costs incurred. The contract price is P20M. Electrified has an unconditional right to all billings made in accordance with the billing schedule stated in the contract. Information on the construction is as follows: 20x1 20x2 20x3 a. contract cost incurred per yr. 8,160,000 7,320,000 1,920,000 b. billings per year 10,000,000 7,000,000 3,000,000 c. collections on billings per year 9,500,000 6,650,000 3,850,000 d. estimated costs to complete 8,840,000 1,720,000 (at each yr. end) a. Compute for the gross profits, revenues and costs of construction in 20x1, 20x2 and 20x3, respectively. b. Provide the journal entries under (i) traditional accounting and (ii) PFRS…
A Construction Co. entered into a P80M fixed price contract for the construction of a private road. The performance obligation on the contract is satisfied over time. Contractor measures its progress on the contract using the “cost-to-cost” method. The estimated total contract cost is P40M. The following were the actual costs incurred during the first year of the construction: Costs of negotiating the contract (charged immediately as expense) 400,000 Costs of materials used in construction 12,000,000 Costs of materials purchased but not yet used in construction 2,000,000 Site labor costs 4,000,000 Site supervision costs 800,000 Depreciation of equipment used in construction 480,000 Depreciation of idle construction equipment 240,000 Costs of moving plant, equipment, and materials to and from the contract site 160,000 Costs of hiring plant and equipment 560,000 Advance payments to subcontractors (subcontracted work is not yet started) 80,000 What is the percentage of completion…