I.

Megaworld Corporation employs the cost-to-cost method in determining the percentage of completion
for revenue recognition. For the contract of 5,000,000, the records shows the following information:
2014
2015
2016
Cost incurred to date
900,000
2,550,000
?
Gross profit (loss)
100,000
350,000
(50,000)
How much is the Estimated costs to complete and costs incurred for the years 2015 & 2016?
II. Two building were in progress at the beginning of 2015. The status at the beginning are as follows:
Contract
Contract Price Costs incurred 1/1/15 Estimated costs to complete
Apartment Manila
1,620,000
600,000
840,000
Apartment Q.C
2,520,000
1,560,000
690,000
During 2015, the following costs were incurred:
Manila
600,000(estimated cost to complete as of 12/31/15, 240,000)
Q.C
750,000(job completed)
How much is the gross profit for the year 2016?
III. VJD Construction was awarded a contract for 1,500,000. The construction will be completed for 3 years.
Details are as follows:
Year
Cost Incurred Estimated Costs to complete
Billings
2013
520,000
780,000
500,000
2014
455,100
417,900
450,000
2015
417,900
550,000
1. Compute the gross profit per year using percentage of completion method and cost
recovery method.
2. Journal entries using percentage of completion method and cost recovery method.
3. All billings were collected except for 2015 of which contract retention is maintained
amounting to 50,000.
4. What if instead of 417,900, the actual cost incurred for 2015 is 624,900? How much is
the gross profit for the year 2016?
5. If based on computation of engineers, the percentage of completion is 45% and 75% for
the years 2014 and 2015. What are now the gross profit for three consecutive years?
IV. DJ Builders Construction Company has used the cost-to-cost percentage of completion method of
recognizing revenue. Ambrose assumed the leadership of the partnership after the recent death of his
father. In reviewing the records, Ambrose finds the following regarding the recently completed building
amounting to 2,000,000:
2014
2015
2016
Gross P/L each year
40,000
140,000
(20,000)
Costs incurred each year
360,000
?
820,000
Ambrose wants to know how effectively the company operated during last three years on this project and
since the information is not complete, has asked for the answers of the following:
1.
2.
3.
4.
5.

How much cots was incurred in 2015?

What percentage of the project was completed by the end of the year 2015?
What was the percentage of completion during the year 2015?
What was the estimated gross profit on the project by the end of 2015?
What was the estimated cost to complete the project at the end of 2015?

V. In 2016, J Builders was contracted to build the private road network of Althea Subdivision for
100,000,000. The project was expected to be finished in 2 years. The contracts provided for:

A 5% mobilization fee (to be deducted from the last billing), payable within 15 days from the
contract signing.
A retention provision of 10% on all billings payable with the final bill after the completed project is
accepted.
Payment of progress billings within 7 days from acceptance.

J Builders which uses the percentage of completion method estimated a 25% gross margin on the project.
By the end of the year, J Builders had represented to Althea corresponding to 50% completion. Althea

accepted it except one for 10% which was accepted on January 5 of next year with the exception of the
second to the last billing for 8% which was due January 3 next year. All accepted billings were settled.
1. How much is the realized gross profit for the year 2016?
2. How much is the payment made for Althea Subdivision in 2016?
VI. Bailey & Barbie Construction has the following accounts (000 omitted).
Project #
Actual Cost
Estimated Cost Contract Price % complete
1
8,756
172,800
192,000
2
11,457
14,857
17,500
3
53,865
61,250
87,500
4
22,800
39,760
49,700
5
44,500
122,310
151,000

5
75
80
55
35

The company accounts for its large jobs by the percentage of completion method-output measures.
Billings are done as follows: a.)20% DP upon contract signing. b.) balance is billed according to percentage
of completion less an application of the DP which is also according to the percentage of completion.
How much is the total billings made and revenue to be recognized for the year?