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Long Term Construction Contract Assignment

The document discusses accounting for long-term construction contracts using the percentage of completion method over multiple problems. It provides estimated costs, billings, collections and completion percentages for various construction projects to calculate income/loss and construction in progress for the periods presented.

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cali cd
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60 views2 pages

Long Term Construction Contract Assignment

The document discusses accounting for long-term construction contracts using the percentage of completion method over multiple problems. It provides estimated costs, billings, collections and completion percentages for various construction projects to calculate income/loss and construction in progress for the periods presented.

Uploaded by

cali cd
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Accounting for Special Transactions

Long-Term Construction Contracts


Assignment

Problem 1:
On May 1 2019, Green Construction Co. entered into a fixed price contract to construct an
apartment building for P3,000,000. Green appropriately accounts for this contract under the
percentage of completion method. Information relating to the contract is as follows:

At December 31: 2019 2020


Percentage of completion 20.00% 60.00%
Estimated cost at completion 2,250,000.00 2,400,000.00
Income recognized (cumulative) 150,000.00 360,000.00

What is the amount of contract cost incurred during the year ended December 31, 2020?

Problem 2:
Cord Builders, Inc. has consistently used the percentage of completion method of accounting for
construction type contracts. During 2019, Cord started work on a P9,000,000 fixed price
construction contract that was completed in 2021. Cord's accounting records disclosed the
following:
Dec-31
2019 2020
Cumulative contract cost incurred 3,900,000.00 6,300,000.00
Estimated total cost at completion 7,800,000.00 8,100,000.00

How much income would Cord have recognized on this contract for the year ended December 31,
2020?

Problem 3:
The Gamboa Construction Co., started work on three job sites during the current year. Data relating
to the three jobs are given below:

Est cost to
Site Contract Price Cost Incurred
complete
Batangas 500,000.00 375,000.00 -
Laguna 700,000.00 100,000.00 400,000.00
San Fernando 250,000.00 100,000.00 100,000.00

Billings on
Site Collections
Contract
Batangas 500,000.00 400,000.00
Laguna 100,000.00 50,000.00
San Fernando - -

What amount of income should be reported for the current year if the percentage of completion
method is used for all contracts?
What would be the amount of Construction in Progress to be reported on the balance sheet if the
percentage of completion method is used?

Problem 4:

Jessup Construction, Inc. has consitently used the percentage of completion method of recognizing
income. During 2020, Jessup started work on a P1,500,000 fixed-price contruction contract. The
income. During 2020, Jessup started work on a P1,500,000 fixed-price contruction contract. The
accounting disclosed the following date for the year ended December 31, 2020:

Cost incurred 465,000.00


Estimated cost to complete 1,085,000.00
Progress billings 550,000.00
Collections 350,000.00

How much loss should Jessup have recognized in 2020?

Problem 5:
On January 1, 2021, an antity accepted a long-term construction project for an initial contract price
of P1,000,000 to be completed on June 30, 2023. On January 1, 2022, the contract price was
increased to P1,500,000 by reason of change in design of the project. The project was completed
on Decmber 31, 2023 which resulted to penalty amounting to P200,000. The outcome of the
construction contract can be estimated reliably.

The entity provided the following data concerning the direct cost related to the said project:

2021 2022 2023


Cost during the year 440,000.00 680,000.00 130,000.00
Remaining estimated costs to
complete at the end of the year 660,000.00 280,000.00 -

What is the construction revenue to be recognized by the entity for the year ended December 31,
2021?
What is the realized gross profit (gross loss) to be recognized by the entity for the year ended
December 31, 2022?
What is the balance of construction in progress on December 31, 2022?
What is the realized gross profit (gross loss) to be recognized by the entity for the year ended
December 31, 2023?

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