Chapter 8 Advacc 1 Dayag

Chapter 8
Problem I
1. Input Measure - Percentage of Completion Method (Cost to Cost Method)
2008:
Contract price
P
1,800,000
Actual costs to date
P 450,000
Estimated costs to
1,200,000
complete
Total estimated project
1,650,000
costs
Estimated total gross profit
150,000
Percentage of completion:
P450,000 / P,1650,000
27.27%
Gross profit recognized
P 40,905
2009:
P
1,800,000
Contract price
Costs
incurred:
2008
2009
P 450,00
1,100,000
Total cost
Total gross profit
Recognized in 2008
Recognized in 2009
2. Input Measure - Cost Recovery Method
2008: (all costs not yet recovered)
2009:
Contract price
Costs incurred:
2008
2009
Total cost
Total gross profit
1,550,000
250,000
40,905
P 209,095
P -01,800,00
P 450,000
1,100,000
1,550,000
P 250,000
Problem II
1. Input Measure - Percentage of Completion Method (Cost to cost Method)
Years
Gross Profit (or Loss)
Supporting computations
recognized
2008
P 2 million
(P108 90) x (P30/P90) = P6
million
2009
( P18 million)
Total loss is (P108 120) = (P12
million)
To date, P6 million was recorded:
therefore, (P12 million) P6 million
= (P18 million) in 2009
2010
P 10 million
Total loss is P 108 110) = (P2
million)
To date, (P 12 million was recorded:
therefore, ( P2 million) (P12
million) = P10 million in 2010
2. Input Measure - Cost Recovery Method

Years
Gross Profit (or Loss)
Supporting computations
2008
P -0( P108 90) = P18 anticipated
gross profit, so no need to
recognized a gross loss
2009
(P 12 million)
Total loss is ( P108 120) = (12
million)
2010
P 10 million
Total loss is (P108- 110) ( P2
million)
To date, ( P12 million was recorded:
therefore, ( P2 million) ( P12
million) = P10 million in 2010
Problem III
1. Journal Entries
a. Input Measure Percentage of completion (cost-to-cost method)
The following analysis is to determine the percentage of completion:
20x3
Contract price:
Initial amount of contract...
Variation..
Total contract price..
Costs incurred each year
Add: Costs incurred in prior years.
Actual costs incurred to date (1)..
Add: Estimated costs to complete..
Total estimated costs (3)..
Estimated gross profit
Percentage of completion (1) / (3)
P528,000
_______P528,000
P 126,048
_______P126,048
_358,752
P484,800
P 43,200
26%
20x4
P528,000
__12,000
P540,000
*P244,032
_126,048
*P370,080
_121,920
P492,000
P 48,000
**74%
20x5
P528,000
__12,000
P540,000
P121,920
_370,080
P492,000
_______P492,000
P 48,000
100%
* including the P7,200 additional costs in 20x4.

** it should be noted that the percentage of completion for 20x4 is calculated by
deducting the P6,000 of
materials held for the following period from the costs incurred up to that year end, i. e., P370,080 P6,000 =
P364,080, P364,080 / P492,000 = 74%.
The revenue, expenses (costs) and profit will be recognized in profit or loss as follows:
20x3
Revenue (P528,000 x 26%)
Costs/Expenses (P484,800 x 26%)
Gross Profit (P43,200 x 26%)
To date
P 137,280
126,048
P 11,232
Recognized in
prior years
-
Recognized in
current year
P 137,280
126,048
P 11,232
20x4
Revenue (P540,000 x 74%)
To date
P 399,600
_364,080
P 35,520
Recognized in
prior years
P 137,280
_126,048
P
11,232
Recognized in
current year
P 262,320
238,032
P 24,288
20x5
Revenue (P540,000 x 100%)
To date
P 540,000
Recognized in
prior years
P 399,600
Recognized in
current year
P 140,400

_492,000
P 48,000
_364,080
P 35,520
_127,920
P 12,480
Alternatively, the gross profit recognized each year may also be computed as follows:
Contract price:
Initial amount of contract.......
Variation
Total contract price
Costs incurred each year.
Add: Costs incurred in prior years..
Actual costs incurred to date (1)...
Add: Estimated costs to complete
Total estimated costs (3)...
Percentage of completion (1) / (3)...
Gross profit to date.
Less: Gross profit in prior years.
Gross profit in current year -% of completion
Gross profit in current year cost recovery
method
20x3
20x4
P528,000
_______P528,000
P126,048
_______P126,048
_358,752
P484,800
P 43,200
____26%
P 11,232
_______P 11,232
P528,000
__12,000
P540,000
P240,032
_126,048
P370,080
_121,920
P492,000
P 48,000
____74%
P 35,520
___11,232
P 24,288
P528,000
12,000
P540,000
P121,920
_370,080
P492,000
_______P492,000
P 48,000
___100%
P 48,000
__35,520
P 12,480
P 48,000
20x5
Following are the entries for the years 20x3 to 20x5:

Percentage of Completion Method
20x3
1. To record costs incurred:
Construction
In
Progress*......
Materials
Inventory..
Cash, payables,
etc..
126,04
8
20x4
232,03
2
20x5
127,92
0
6,000
126,04
8
6,000
121,92
0
244,03
2
2. To record progress billings:

Accounts receivable..
Progress billings*.
.
144,00
0
240,00
0
144,00
0
156,00
0
240,00
0
156,00
0
3. To record collections:
Cash.....
Accounts
receivable
4. To recognize Revenue, Costs
and Gross Profit:
Construction
Expenses
Construction in Progress*..
....
Revenue from
Construction......
5. To close Construction In
Progress**
and Progress Billings account:
Progress
billings
120,00
0
228,00
0
120,00
0
126,04
8
192,00
0
228,00
0
238,03
2
11,232
127,92
0
24,288
137,28
0
192,00
0
12,480
262,32
0
140,40
0
540,00
0
Construction In
Progress.
* The term Contract account may alternatively be used.
** If Contract account is used then no entry is required for No. 5.
540,00
0
b. Input Measure Cost Recovery Method

The following table shows the data needed for further analysis:
20x3
Contract price:
Initial amount of contract...
Variation..
Total contract price..
Add: Costs incurred in prior years.
Actual costs incurred to date....
Add: Estimated costs to complete..
Total estimated costs ...
20x4
P528,000
_______P528,000
P126,048
_______P126,048
____ _?
P
?
20x5
P528,000
__12,000
P540,000
P244,032
_126,048
P370,080
____ _?
P
?
P528,000
__12,000
P540,000
P121,920
_370,080
P492,000
_______P492,000
The revenue, expenses (costs) and profit will be recognized in profit or loss as follows:
20x3
Revenue*
Costs/Expenses
Gross Profit
* equivalent to costs incurred
To date
P 126,048
126,048
P
0
Recognized in
prior years
-
Recognized in
current year
P 126,048
126,048
P
0
20x4
Revenue*
Costs/Expenses
Gross Profit
* equivalent to costs incurred
To date
P 364,080
_364,080
P
0
Recognized in
prior years
P 126,048
126,048
P
0
Recognized in
current year
P 238,032
238,032
P
0
20x5
To date
Recognized in
prior years
Recognized in
current year
Revenue (P540,000 x 100%)
P 540,000
P 364,080
_492,000
364,080
127,920
P 48,000

P 48,000
P 175,200
Alternatively, the gross profit recognized each year may also be computed as follows:
Contract price:
Initial amount of contract.......
Variation
Total contract price
Costs incurred each year.
Add: Costs incurred in prior years..
Actual costs incurred to date ....
Total estimated costs ....
Estimated gross profit.
Percentage of completion..
Gross profit to date.
Less: Gross profit in prior years.
Gross profit in current year...
20x3
20x4
P528,000
_______P528,000
P 126,048
_______P 126,048
____ _?
P
?
P
0
_
-___
P
0
_______P
0
P528,000
__12,000
P540,000
P244,032
_126,048
P370,080
____ _?
P
?
P
0
_
-___
P
0
_______P
0
Following are the entries for the years 20x3 to 20x5:
20x5
P528,000
12,000
P540,000
P 121,920
_370,080
P492,000
_______P492,000
P 48,000
___100%
P 48,000
__
0
P 48,000
20x3
1. To record costs incurred:
Construction
In
Progress*......
Materials
Inventory..
Cash, payables,
etc..
20x4
126,04
8
20x5
238,03
2
127,92
0
6,000
126,04
8
6,000
121,92
0
244,03
2
2. To record progress billings:

Accounts receivable..
Progress billings*.
.
144,00
0
240,00
0
144,00
0
156,00
0
240,00
0
156,00
0
3. To record collections:
Cash.....
Accounts
receivable
4. To recognize Revenue, Costs
and Gross Profit:
Construction
Expenses
Construction in Progress*..
....
Revenue from
Construction......
120,00
0
228,00
0
120,00
0
126,48
0
192,00
0
228,00
0
238,03
2
127,92
0
48,000
126,48
0
238,03
2
5. To close Construction In
Progress**
and Progress Billings account:
Progress
billings
Construction In
Progress.
* The term Contract account may alternatively be used.
** If Contract account is used then no entry is required for No. 5.
Current Liability:
Payables (Payments on Account)
Progress billings
Less: Construction In Progress.
Gross
amount
due
to
customers
20x3
P 24,000
20x4
P 36,000
P399,600
_384,000
P 15,600
P
6,000
P144,000
_137,280
P
6,720
175,92
0
540,00
0
540,00
0
2. Due from/Due to Customers

a. Input Measure - Percentage of Completion Method
Current Asset:
Accounts receivable.
Other receivables:
Construction In Progress
Less: Progress billings.
Gross amount due from
customers...
Raw materials Inventory
192,00
0
20x5
P
Progress Billings
20x3 CI 126,048
Pr
11,232
144,000 20x3
end of x3 137,280
20x4 CI 238,032
Pr
11,232
144,000 end of x3
240,000 20x4
end of x4 399,600
20x5 CI 127,920
Pr
12,480
384,000 end of x4
156,000 20x5
540,000
540,000
540,000
540,000
where: CI - cost incurred each year

Pr - profit
b. Input Measure Cost Recovery Method

Current Asset:
Accounts receivable.
Raw materials Inventory
Current Liability:
Payables (Payments on Account)
Progress billings
Less: Construction In Progress.
Gross
amount
due
to
customers
20x3
P 24,000
20x4
P 36,000
P
6,000
P 137,280
_144,000
P384,000
_364,080
6,720
20x5
P
P 19,920
Progress Billings
20x3 CI 126,048
Pr
0
144,000 20x3
end of x3 126,048
20x4 CI 238,032
Pr
0
144,000 end of x3
240,000 20x4
end of x4 364,080
20x5 CI 127,920
Pr
48,000
384,000 end of x4
156,000 20x5
540,000
540,000
540,000
540,000
where: CI - cost incurred each year

Pr - profit
3. Gross Profit
a. Input Measure - Percentage of Completion Method (refer to requirement 1
for detailed computation)
Revenue
Less: Costs / Expenses...
Gross Profit.
20x3
P 137,280
_126,048
P
11,232
20x4
P 262,320
_238,032
20x5
P 140,400
_127,920
P 24,288
P 12,480
b. Input Measure Cost Recovery Method (refer to requirement 1 for detailed

computation)
Revenue
Less: Costs / Expenses...
Gross Profit.
20x3
P 126,048
_126,048
P
0
20x4
P 238,032
_238,032
P
0
20x5
P 175,920
_127,920
P 48,000
Problem IV
1. Anticipated/Gross Loss
a. Input Measure Percentage of Completion (Cost-to-Cost Method)
2008:
Contract price
Actual cost to date
P2,500,000
P1,500,00
0
1,200,000
Estimated costs to complete

Total estimated project costs
Estimated loss, recognized in 2008
2,700,000
P
(200,000)
2009:
Contract price
Costs incurred:
P
2,500,000
In 2008
In 2008
Total cost
Total loss
Recognized in 2008
Recognized in 2009
Measure Cost Recovery Method
Loss in 20x4
Loss in 20x5
a.
Input
P1,500,00
0
1,300,000
2,800,000
P
(300,000)
(200,000)
P
(100,000)
P( 200,000)
P (100,000)
2. Journal Entries
a. Input Measure Percentage of Completion (Cost-to-Cost Method)
2008:
Construction in progress
Various credits
1,500,000
1,500,000
Accounts receivable
Billings on construction contract
1,200,000
Cash
Accounts receivable
1,000,000
Cost of construction
Construction in progress (loss)
Revenue from long-term contracts*
2009:
Various credits
1,588,889
Accounts receivable
1,300,000
Cash
1,500,000
Accounts receivable
Cost of construction
Construction in progress (loss)
Revenue from long-term
contracts**
(P1,500,000/P2,700,000)
** P2,500,000
1,388,889
1,200,000
1,000,000
1,300,000
200,000
1,388,889
1,300,000
1,300,000
1,500,000
1,211,111
100,000
1,111,111
2,500,000
2,500,000
*P2,500,000
Problem V
Item to compute
Total revenue recognized during 2009 (w):
CIP contains cost + gross profit = revenue, so w = P50
Gross profit recognized during 2009 (x): P50 P35 = P15
Billings on construction (y) : P14 + P 46 = P60
Net billings in excess of construction in progress (z): Billings of P60
CIP of P50
Calculate the percentage of PAC that was completed during 2009:
50/150 = 33.33%
Problem VI
Item to compute
Cash collected by KP on Cincy One during 2009. (P75 billings P10
A/R)
Actual costs incurred by KP on Cincy One during 2009 (P66 CIP P22
gross pofit)
At 12/31/2009, the estimated remaining costs to complete Cincy One
(44/{44 + x})(300 {44 + x}) = 22; x = 156
Answer
P50 million
P 15
million
P60million
P10 million
333.33%
Answer
P65 million
P44 million
P156
million
The percentage of Cincy One that wa completed during 2009 100 x

(44/ {44 + 156})
Problem VII
1.
Progress billings on construction contract
Less accounts receivable
Cash collected in 20x4
22%
P562,000
150,500
P411,500
2.
Gross profit from construction contract + Construction in progress = Revenue for 20x4
P301,000 + P602,000 = P903,000
P903,000/P7,525,000 = 12%
Percentage completed in 20x4
P301,000/.12 = P2,508,333
Estimated income on construction contract
Problem VIII
1. Percentage of Completion Method (Cost-to-cost Approach)
20x4
20x5
Contract price ...................
P250,000
P250,000
Current year costs ...............
110,000
120,000
Costs to date ....................
110,000
230,000
Estimated cost to complete .......
100,000
20,000
Estimated total cost .............
210,000
245,000
Estimated total gross profit .....
40,000
5,000
Percent complete .................
52%
94%
Revenue to date ..................
P130,000
P230,000
20x6
P250,000
15,000
245,000
0
240,000
5,000
100%
P250,000
20x4:
Revenue
Costs (110/210 x 210)
Gross profit
To Date
at Dec. 31
P130,000
110,000
P 20,000
20x5:
Revenue
Costs (230/245 x 245)
Gross profit (loss)
P235,000
230,000
P 5,000
P130,000
110,000
P 20,000
P105,000
120,000
P(15,000)
20x6:
Revenue
Costs
Gross profit
P250,000
245,000
P 5,000
P235,000
230,000
P 5,000
P 15,000
15,000
P
0
1.
2.
3.
4.
5.
Revenue recognized during

the year
Gross profit recognized during
the year
Balance in the construction in
progress account at Dec. 31 .
Balance in the progress
billings account at Dec. 31 .
Net (3-4) or (4-3) due from (due to)
20x4
P130,000
20,000
Previous
Years
Current
Year
P130,000
110,000
P 20,000
20x5
P100,000
20x6
P15,000
(15,000)
130,000
235,000
125,000
5,000
250,000
(15,000)
0
0
2. Cost Recovery Method

20x4
20x5
20x6
1.
2.
3.
4.
5.
Revenue recognized during

the year
Gross profit recognized during
the year
Balance in the construction in
progress account at Dec. 31 .
Balance in the progress
Net (3-4) or (4-3) due from (due to)
P110,000
P120,000
P20,000
5,000
110,000
230,000
125,000
(15,000)
250,000
(20,000)
0
0
Problem IX
1. Percentage of Completion Method (Cost-to-cost Approach)
Contract price
Current year costs
Costs to date
Estimated cost to complete
Estimated total cost
Estimated total gross profit
Percent complete
2005
P250,000
150,000
150,000
90,000
240,000
10,000
63%
2006
P250,000
100,000
250,000
20,000
270,000
(20,000)
93%
2007
P250,000
15,000
265,000
0
265,000
(15,000)
100%
Revenue to date
P157,500
P232,500
P250,000
2005:
Revenue ............
Costs (150/240 x 240)
Gross profit ............
To Date
at Dec. 31
P157,500
150,000
P 7,500
2006:
Revenue ............
Costs ............
Gross profit (loss) ............
P232,500
252,500
P(20,000)
P157,500
150,000
P 7,500
P 75,000
102,500
P(27,500)
2007:
Revenue ............
Costs ............
Gross profit (loss) ............
P250,000
265,000
P(15,000)
P232,500
252,500
$(20,000)
P 17,500
12,500
P 5,000
20x4
20x5
20x6
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 the progress
5. NNet (3-4) or (4-3) due from (due to)
Balance in accounts receivable

at Dec. 31 (after closing entries)
P150,000
7,500
157,500
Previous
Years
Current
Year
P157,500
150,000
P 7,500
P102,500
(27,500)
230,000*
110,00
0
47,50
0
230,00
0
0
10,000
10,000
P12,500
5,000
0
0
0
*P150,000 + 7,500 + 157,500 + 100,000 costs incurred during the year 27,500
loss
2. Cost Recovery Method
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 the progress
5. NNet (3-4) or (4-3) due from (due to)
20x4
P150,000
0
20x5
20x6
P 80,000*
P20,000**
(20,000)
5,000
150,000
***230,000
110,00
0
40,00
0
230,00
0
0
0
0
Balance in accounts receivable

at Dec. 31 (after closing entries)
10,000
10,000
0
*P100,000 costs incurred P20,000 estimated loss = P80,000, revenue 20x5
** P250,000 P150,000, revenue 20x4 P80,000, revenue 20x5
***P150,000 + P100,000 P20,000
Multiple Choice Problems
1. a
(2.5 M + 2.0 M + 1 M* + .5 M)
P
6M
Add: Cost incurred in prior years
0
Costs incurred to date
P
6M
Add: Estimated cost to complete
Total estimated costs
P 18 M
Percentage of completion
6 M / 18M
Administrative cost as long as reimbursable is included in the construction costs.
Marketing costs are considered as expenses.
Depreciation of idle equipment is charged to expenses.
2. b
P7,200,000
x (P15,000,000 P12,000,000) = P1,800,000.
P7,200,000 + $4,800,000
3. c
P1,170,000
- x (P3,300,000 P1,950,000) = P810,000
P1,950,000
(P3,300,000 P2,010,000) P810,000 = P480,000.
4. d
Under the percentage of completion method, the Construction-In-Progress account is

used for cost incurred during the year and any realized gross profit (loss). The following
T-account is prepared:
Construction-In-Progress
CI in 2004
210,000
RGP in 20x4 (?)
34,000
End of 20x4
244,000
CI in 20x5
384,000
RGP in 20x5 (?)
100,000
End of 20x5
5. b
6.
7.
728,000
P1,200,000
x (P7,200,000 P4,800,000) = P600,000.
P4,800,000
P7,200,000 P4,875,000 =P2,325,000.
20x4
P4,800,000
_______75%
P3,600,000
P3,400,000
P 200,000
_______-0P 200,000
Contract Price
x: Percentage-of-completion
Recognized Revenue to date
Less: Costs incurred to date
Gross Profit to date
Less: GP in prior year
Gross profit in current year
8.
9.
P3,600,000
x (P8,400,000 P6,000,000) = P1,440,000.
P6,000,000
P8,400,000 P5,600,000 = P2,800,000.
Items 10 and 11
No number requirement identified, if percentage-of-completion then the answer
would (a)
a
[P1,950,000 (P1,950,000 + P1,300,000)] P2,250,000 = P1,350,000
(P5,500,000 P3,350,000) P1,350,000 = P800,000.
10. Cost Recovery Method - c - P5,500,000 P3,350,000 = P2,150,000.
11. a - Gross profit is recognized in the year of sale, 20x4; therefore, in 20x6 no gross profit
should be realized.
12. c
13. a
P600,000
x (P1,500,000 P1,000,000) = P300,000
P600,000 + P400,000
(P1,500,000 P1,050,000) P300,000 = P150,000.
Contract Price
Less: Total Estimated Costs
Costs Incurred-1/10/x4 to 12/31/x5
Less: Costs incurred to date
Multiplied by: % of completion
Gross Profit to date
P6,000,000
P3,600,000
1,200,000
4,800,000
P1,200,000
___3.6/4.8
P 900,000
Less: GP in prior year (given)

Gross profit in current year
___600,000
P 300,000
14. b
20x4: Cost to date P7,500,000 x 20%

P1,500,000
20x5: Cost to date P8,000,000 x 60%
4,800,000
Cost incurred during 20x5
15. b =
P3,300,000
(P25,000,000 .60) (P22,500,000 .25) = P9,375,000.
16. b
Costs Incurred
Contract price.
Cost incurred each year..
Add: Cost incurred in prior year.
Costs incurred to date..
Total estimated costs.
Estimated gross profit (loss)..
Multiplied by: percentage of completion..
Construction In Progress account
Less: Progress billings
Construction In Progress account (net) or Due from customers
50,000
P260,000
P 50,000
-0P 50,000
150,000
P200,000
P60,000)
__50/200
15,000
65,000
30,000
35,000
17. d - P2,040,000 P980,000 = P1,060,000 (revenue limited to costs incurred since costrecovery method must be used).
18. a - P2,040,000 (P1,000,000 + P1,000,000) = P40,000.
19. c - (P1,000,000 + P1,000,000) (P648,000 + P1,280,000) = P72,000.
20. d
21.
d
Recognized gross profit (loss) to date..
Less: Recognized gross profit in prior
years.
Recognized gross profit each year..
P( 100,000)
____20,000
P (120,000)
22. b = P5,600,000 (P2,560,000 + P3,280,000) = P240,000.

23. c
Contract price.
Estimated gross profit (loss).
.
Recognized gross profit (loss) to date..
Prior year
P7,000,00
0
Current year
P7,000,000
P5,000,000
2,800,000
P7,800,000
(P 800,000)
P600,000
_____100%
(P 800,000)

years.
Recognized gross profit each year..
___600,000
(P1,400,000)
24. c
P7,440,000 .30 = P2,232,000.
25. d
(P7,200,000 .75) (P7,100,000 .30) = P3,270,000.
26. b
(P7,440,000 .75) (P620,000 8) = P620,000 debit.
27. c
P7,440,000 .25 = P1,860,000

P7,500,000 (P7,200,000 .75) = P2,100,000.
28. b
(P9,000,000 P8,250,000) (P3,795,000 P8,250,000) = P345,000.
29. c
P3,795,000 + P345,000 = P4,140,000.
30. d
P3,500,000 P1,350,000 P1,525,000 = P625,000.
31.
P240,000 P100,000 = P140,000.
32.
P300,000 P60,000 = P240,000

P240,000
x (P2,400,000 Total estimated cost) = P60,000
Total estimated cost
Total estimated cost = P1,920,000
P2,400,000 P1,920,000 =P480,000.
33. c
(P6,325,000 P13,750,000) P1,250,000 = P575,000.
34. a
(P6,325,000 P13,750,000) P1,250,000 = P575,000.

P6,325,000 + P575,000 = P6,900.000.
35. d - P85M costs incurred in 2011 = revenue recognized in 2011. Under the costs recovery
(zero-profit approach) of construction accounting, revenue is recognized up to the extent
of costs incurred as long as it is probable will be recoverable.
36. b -
20x5: P12,000,000 > P11,870,000, No loss;

20x6: P12,000,000 P12,400,000 = P400,000 loss.
37. a - Revenue recognized to the extent of costs incurred

38.
P3,200,000 P2,150,000 = P1,050,000.
39.
P1,500,000 P820,000 = P680,000.
40. a
Under PFRS, the excess of Construction In Progress amounting to P2,100,000
(P2,250,000 P150,000, loss) P1,900,000, billings = P200,000 is classified as due from
customers.
Under the US FASB, the excess of P200,00 is considered as an inventory

account.
41. c
Costs of construction
Revenue for long-term contracts
1,200,000
800,000
2,000,000
Percentage complete = P1,200,000 / (P1,200,000 +P600,000) = 2/3

Revenue recognized = 2/3
P3,000,000 = P2,000,000
Cost recognized = P1,200,000
Gross profit recognized = P2,000,000
P1,200,000 = P800,000
42. a
Profit
Excess (Due from customers)
P1,200,000
800,000
P2,000,000
1,500,000
P 500,000
43. b
600,000
400,000
1,000,000
Total revenue P3,000,000

revenue previously recognized P2,000,000 = Revenue to
recognize this year P1,000,000.
Cost recognized = P600,000
Gross profit recognized = P1,000,000
P600,000 = P400,000
44. d
1,200,000
1,2000,00
0
Under cost recovery method, revenue should be recognized up to the extent of costs
incurred.
45. b
Profit
Excess (Due to customers)
P1,200,000
0
P1,200,000
1,500,000
P( 300,000)
46. d
600,000
1,200,000
1,800,000
Under the cost recovery method, record equal amounts of revenue and cost until cost
recovered, and then record gross profit. In 20x4, recorded revenue and cost of
P1,200,000, so record remaining cost of P600,000 and all gross profit of P1,200,000 in
20x5.
47. a
Contract price
20x4
P 9,600,000
20x5
P10,080,00
P 4,920,000

4,920,000
P 9,840,000
Estimated Gross Profit (loss)

Multiply by: % of completion
Recognized Gross Profit (Loss) to date
Less: Gross Profit (Loss) in prior year
Recognized Gross Profit (Loss) in current year
% of Completion / Cost Recovery Method:
Construction in Progress
P(240,000
)
100%
P
(240,000)
_________
P
(240,000)
P
8,640,000
2,160,000
P
10,800,000
P
(720,000)
100%
P (720,000)
(240,000)
P
(480,000)
Progress Billings
CI
4,920,000
240,000 loss
5,280,000
CI
4,680,000
3,720,000
480,000 loss
5,280,000
3,420,000
7,920,000
8,700,000
due to customers
P780,000
Note: If there is an anticipated loss, the Construction-in-Progress for both methods

will exactly be the same in the year the loss was incurred.
48. d
Percentage of Completion:
Contract price..
Cost incurred each year.
Add: Cost incurred in prior year
Add: Estimated costs to compute.
Multiply by: percentage of completion.
Recognized gross profit to date
years
Recognized gross profit each year.
Project 6
P500,000
P375,000
_________
P375,000
________
P375,000
P125,000
100
%
P125,000
_________
Project 7
P700,000
P100,000
________
P100,000
400,000
P500,000
P200,000
20
%
P 40,000
_________
Project 8
P250,000
P100,000
________
P100,000
100,000
P200,000
P 50,000
50%
P125,000
P 40,000
P 25,000
Project 7
P100,000
Project 8
P100,000
100,000
100,000
P 25,000
_________
Cost Recovery Method of Construction Accounting:
Recognized Revenue....
Project 6
P500,000
*
Less: Costs of long-term construction

contract..
375,000
P125,000
* Since the contract is completed then the full amount of P500,000 contract price should be
recognized as revenue.
Percentage of Completion
Pr. 6 - Cl. 500,000 Pr. 6
375,000 Pr.
125,000
Pr. 7 Cl.
100,000
Pr.
40,000
Pr. 8. Cl
100,000
Pr.
100,000
765,000 500,000
12/31
(d)
265,000
Cost Recovery Method of Construction

Pr. 6 - Cl. 500,000 Pr. 6
375,000
Pr.
125,000
Pr. 7 CI
100,000
500,000
Pr. 8 CI
100,000 (d)
700,000
12/31
200,000
49. a
Input Measures: Efforts-Expended Method - using timbers laid
Year 2
Timers laid Each Year
300
Add: Timbers laid in Prior Years
150
Timbers laid to date
450
Add: Additional support timbers to be laid
520
Total Estimated Timbers
970
Percentage-of-Completion
45/97
x: CONTRACT PRICE
P 800,000
Recognized Revenue to Date
P 371,134
Recognized Revenue in Prior Years
Recognized Revenue in Current Yr.
Year 3
500
450
950
-0950
100%
P 800,000
P 800,000
371,134
P
428,866
Output Measures Number of trail feet

Trail feet Each Year
Add: Trail fees in Prior Years
Trail feet to date
Add: Additional trail feet to be constructed
Total Estimated Trail feet
x: CONTRACT PRICE
Recognized Revenue to Date
Recognized Revenue in Prior Years
Recognized Revenue in Current Yr.
Year 2
7,500
3,000
10,500
8,200
18,700
105/187
P 800,000
P 449,198
Year 3
8,000
10,500
18,500
___-018,500
100%
P 800,000
P 800,000
449,198
P
350,802
2007
P5,000,00
0
2008
P5,000,000
50. b
Contract price..
2006
P5,000,00
0
Cost incurred each year.

Add: Cost incurred in prior year
P
900,000
900,000
P2,550,00
0
P2,050,00
0
2,550,000
P4,600,000
P
100,000
-0-
1,700,00
0
P4,250,00
0
P
750,000
60
%
P
450,000
100,000
P
100,000
P
350,000

Multiply by: percentage of completion.
Recognized gross profit to date
years
-0P4,600,000
P 400,000
100
%
P 400,000
450,000
P( 50,000)
51. d refer to No. 50

52. c
Contract Price
P60,000,000
Less: Total Estimated Costs
Cost Incurred to Date P26,000,000
Add: Estimated Costs to Complete 25,000,000
51,000,000
Estimated Gross Profit.
P 9,000,000
Multiplied by: % of completion.
30%
Recognized gross profit to date..
P 2,700,000
Less: RGP in prior years
_________0
Recognized gross profit in current year
P 2,700,000
Construction-in-progress Account:
GP in the current year
Less: Progress billings..
Due from customer (net).
P 26,000,000
2,700,000
P 28,700,000
5,000,000
P 23,700,000
53. c
Contract Price
Multiplied by: Gross Profit Rate
Estimated Gross Profit of the entire contract
Multiplied by: Percentage of Completion for first year
Gross Profit realized for current year
54. c
10%
P100,000,000
_________25%
P 25,000,000
_________50%
P 12,500,000
Contract Price
x: Mobilization Fee
P120,000,000
Collection in 20x4
Note: Billings for 20x4 will be collected in January 20x5.
P 12,000,000
55. a
Mobilization Fee: 5% x P10M
P 5.0 M
Collection on Billings:
Contract price
P 100 M
x: Progress billings, net of 10% and 8% (50% - 10% - 8%)
32%
Progress billings
P 32 M
x: Collections net of contract retention of 10%

M
90%
Collections in 20x4
28.8
P 33.8 M
56. b cost recovery method is used.

At the end of 20x4 the contractor must recognized only to the extent of recoverable
contract costs incurred (i.e., P5,000 contract revenue and P5,000 construction
costs/expenses).
Quiz- VIII
1. P100,000 = [P900,000 (P900,000 + P1,800,000)] P3,000,000 = P1,000,000
P1,000,000 P900,000 = P100,000.
2. P150,000
Contract price
Multiply by: % of completion
4,500,000
1,350,000
_2,700,000
4,050,000
450,000
1,350/4,050
150,000
____-0150,000
3. P150,000
Contract price
20x5
3,000,000
2,250,000
750,000
300,000
20x6
3,000,000
1,800,000
_600,000
2,400,000
600,000
1,800/2,400
450,000
_300,000
150,000
4. P80,000
20x5
1,600,000
240,000
_960,000
1,200,000
400,000
240/1,200
80,000
______0
80,000
Contract price
5. P20,000
Contract price
20x5
1,400,000
400,000
_____-0400,000
20x6
1,400,000
400,000
400,000
800,000

_400,000
800,000
600,000
400/800
300,000
______0
300,000
200,000
1,000,000
400,000
800/1,000
320,000
300.000
20,000
6. P-0- , Under the cost recovery method, record equal amounts of revenue and cost until
cost recovered, and then record gross profit
7.P240,000 Profit
20x5
4,000,000
960,000
_______0
960,000
Contract price
3,200,000
800,000
960/3,200
240,000
_______0
240,000
8. P102,000
20x5
850,000
238,000
_______0
238,000
357,000
595,000
255,000
238/595
102,000
_______0
102,000
Contract price
9. P990,000
Contract price
Costs incurred to date*
20x5
3,000,000
450,000
20x6
3,000,000
990,000
450,000
1,440,000
2,250,000
2,400,000

750,000
____20%
150,000
______0
150,000
600,000
_____60%
360,000
150.000
210,000
* total estimated costs x % of completion
10. P50,000
20x5
1,500,000
465,000
_______0
465,000
1,085,000
1,550,000
( 50,000)
100%
( 50,000)
_______0
( 50,000)
Contract price
11. P625,000
Contract price
20x5
3,500,000
1,350,000
-01,350,000
1,350,000
2,700,000
800,000
-0-0-
20x6
3,500,000
1,525,000
1,350,000
2,875,000
_______0
2,875,000
625,000
___100%
625,000
_______0
625,000
12. P550
Costs
Incurred.
Contract price.
Construction In Progress account inventory
400
P2,750
P 400
___-0P 400
_1,600
P2,000
P 750
400/2,000
150
550
account
13. P1,200,000
The term completed should be cost recovery
Costs Incurred
Contract price.
Construction In Progress account inventory account
700,000
P2,000,000
P 700,000
______-0P 700,000
__800,000
P1,500,000
P 500,000
________0
_______0
700,000
20x5
Costs incurred
Contract price.
600,000
P2,000,000
P 600,000
_700,000
P1,300,000
)
__800,000
P(2,100,00
0)
P
(100,000)
________0
_(100,00
0)
1,200,00
0
14. P32,000 = P47,000 P15,000
15. P782,000
20x5
Costs Incurred
Contract price.
238,000
P850,000
P238,000
______-0P238,000

_357,000
P595,000
P255,000
_238/595
102,000
340,000
20x6
Costs incurred
Contract price.
Less: Progress billings (P260,000 + P210,000)
Construction In Progress account (net) Due from
customers
319,600
P850,000
P319,600
_238,000
P557,600
_139,400
P697,000
P153,000
_557.6/697
_122,400
782,000
470,000
312,000
16. P312,000
17. same with no.16 P312,000
18. (P9,000,000 P8,250,000) (P3,795,000 P8,250,000) = P345,000.
19.P3,795,000 + P345,000 = P4,140,000.
20. P2,750,000
P1,650,000
P5,000,000 = P2,750,000
P3,000,000
21.
Accounts Receivable................................................................. 1,650,000

Billings on Construction in Process ................................
1,650,000
22.
Construction Expenses.............................................................. 1,650,000

Construction in Process............................................................. 1,100,000
Revenue from Long-Term Contracts................................
2,750,000
23. P875,000
Revenue
Costs
Total gross profit
Recognized in 20x5
Recognized in 20x6
Or
Total revenue
Recognized in 20x5
Recognized in 20x6
Costs in 20x6
Gross profit in 20x6
24.
25.
26.
20x5
20x6
20x7
Gross Profit
P750,000a
P210,000b
P440,000c
P5,000,000
3,025,000
1,975,000
(1,100,000)
P 875,000
P5,000,000
(2,750,000)
2,250,000
(1,375,000)
P 875,000
20x5
20x6
20x7
Completed-Contract
Gross Profit
P1,400,000d
P1,500,000
P2,000,000 = P750,000
P4,000,000
P2,640,000
P1,600,000 = P960,000
P4,400,000
Less 20x5 gross profit
20x6 gross profit
Total revenue
Total costs
Total gross profit
Recognized to date
20x7 gross profit
Total revenue
Total costs
Total gross profit
(750,000)
P210,000
P6,000,000
4,600,000
1,400,000
(960,000)
P 440,000
P6,000,000
4,600,000
P1,400,000
27. P312,500
Revenue
= [P250,000/(P250,000 + P750,000)]
P1,250,000
= P312,500
Gross profit = P312,500 P250,000 = P62,500
Construction in progress = P250,000 + P62,500 = P312,500
28. P125,000
(2)
Current Assets
Inventories
Construction in progress*
P1,000,000
Less: Partial billings**
(875,000)
Costs and recognized profit not
P 125,000
yet billed
*Revenue to date = (P250,000 + P600,000)/
(P250,000 + P600,000 +
P212,500) 1,250,000 = P1,000,000
Construction in progress = P250,000 +
P600,000 + P150,000 = P1,000,000
**Partial billings = P375,000 + P500,000 =
P875,000
29. P60,00
Revenue to date
Revenue from previous periods
Revenue for 20x7
Costs incurred in 20x7
Gross profit for 20x7
THEORIES
P1,250,000
_1,000,000
P 250,000
_ 190,000
P
60,000
1
.
2
.
3
.
4
.
5
.
36.
37
.
38
.
39
.
40
.
False
6.
False
11.
False
16.
True
True
7.
False
12.
True
17.
False
True
8.
False
13.
False
18.
True
False
9.
True
14.
True
19.
False
False
10
,
False
15,
False
20.
True
21
.
22
.
23
.
24
.
25
.
True
26.
True
False
27.
True
False
28.
False
False
29.
False
False
30.
True
31
.
32
.
33
.
34
.
35
.
False
True
True
False
False
41.
46.
51.
56.
61.
66.
42
.
43
.
44
.
45
.
47.
52.
57.
62.
67.
48.
53.
58.
63.
68.
49.
54.
59.
64.
69.
50.
55.
60.
65.
70.
False
False
True
False
True

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Chapter 8

2. Input Measure - Cost Recovery Method

* including the P7,200 additional costs in 20x4.

Costs/Expenses (P492,000 x 100%)

Following are the entries for the years 20x3 to 20x5:

2. To record progress billings:

b. Input Measure Cost Recovery Method

Revenue (P540,000 x 100%)

Costs/Expenses (P492,000 x 100%)

Following are the entries for the years 20x3 to 20x5:

2. To record progress billings:

2. Due from/Due to Customers

where: CI - cost incurred each year

b. Input Measure Cost Recovery Method

where: CI - cost incurred each year

b. Input Measure Cost Recovery Method (refer to requirement 1 for detailed

Estimated costs to complete

The percentage of Cincy One that wa completed during 2009 100 x

Revenue recognized during

2. Cost Recovery Method

Revenue recognized during

1. Construction costs (expense)

Balance in accounts receivable

Balance in accounts receivable

Under the percentage of completion method, the Construction-In-Progress account is

Less: GP in prior year (given)

20x4: Cost to date P7,500,000 x 20%

(P25,000,000 .60) (P22,500,000 .25) = P9,375,000.

22. b = P5,600,000 (P2,560,000 + P3,280,000) = P240,000.

Less: Recognized gross profit in prior

P7,440,000 .30 = P2,232,000.

(P7,200,000 .75) (P7,100,000 .30) = P3,270,000.

(P7,440,000 .75) (P620,000 8) = P620,000 debit.

P7,440,000 .25 = P1,860,000

(P9,000,000 P8,250,000) (P3,795,000 P8,250,000) = P345,000.

P3,795,000 + P345,000 = P4,140,000.

P3,500,000 P1,350,000 P1,525,000 = P625,000.

P240,000 P100,000 = P140,000.

P300,000 P60,000 = P240,000

(P6,325,000 P13,750,000) P1,250,000 = P575,000.

(P6,325,000 P13,750,000) P1,250,000 = P575,000.

20x5: P12,000,000 > P11,870,000, No loss;

37. a - Revenue recognized to the extent of costs incurred

P3,200,000 P2,150,000 = P1,050,000.

P1,500,000 P820,000 = P680,000.

Under the US FASB, the excess of P200,00 is considered as an inventory

Percentage complete = P1,200,000 / (P1,200,000 +P600,000) = 2/3

Total revenue P3,000,000

Revenue for long-term contracts

Costs incurred to date

Add: Estimated cost to complete

Estimated Gross Profit (loss)

Note: If there is an anticipated loss, the Construction-in-Progress for both methods

Cost Recovery Method of Construction Accounting:

Less: Costs of long-term construction

Cost Recovery Method of Construction

Output Measures Number of trail feet

Cost incurred each year.

Add: Estimated costs to complete

Total estimated costs.

51. d refer to No. 50

x: Collections net of contract retention of 10%

56. b cost recovery method is used.