Heart, Inc. consistently uses the percentage of completion method of recognizing income. During 2018, Heart started work on a P3,000,000 fixed price project. The accounting records disclosed the following data for the year ended December 31, 2018: Costs incurred, P930,000; Estimated cost to complete, P2,170,000; Progress billings, P1,100,000; Collections, P700,000. How much is the balance of Construction in Progress account in 2018?

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A: Answered:

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Q: 2016 2017 2018 $ 1.000.000.000,00 $ 2.916.000.000,00 $4.050.000.000,00 $ 3.000.000.000,00…

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A: Total cost = Cost incurred to date + Estimated cost to complete = 2,700,000 + 900,000 = P3,600,000

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Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.