Long-Term Construction Contracts
CHAPTER 10 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 10-1:
a Percentage of Completion Method: Contract Price Less:Total estimated cost Cost incurred Estimated remaining cost Gross profit estimated % of completion (200,000/600,000) Gross profit to be recognized Zero Profit Method:
10-2:
10-4:
P 200,000 _400,000
__600,000 400,000 __33 1/3% P 133,333 0
a P100,000 Contract Price Less: Total estimated cost Estimated gross profit % of completion: 2012 (3,900,000/7,800,000) 2013(6,300,000/8,100,000) Gross profit earned to date Less: Gross profit earned in prior year Gross profit earned each year
10-3:
P1,000,000
2012 2013 P9,000,000 P9,000,000 _7,800,000 _8,100,000 1,200,000 900,000 50% _________ ______78% 600,000 700,000 ________– ___600,000 P 600,000 P 100,000
a Contract Price Less: Total estimated cost (3,600,000 + 1,200,000) Estimated gross profit % of completion (3,600,000/4,800,000) Gross profit earned to date Less: Gross profit earned in 2012 Gross profit earned in 2013
P6,000,000 _4,800,000 1,200,000 _____75% 900,000 __600,000 P 300,000
b Contract Price Less: Total estimated cost (930,000 + 2,170,000) Loss
P3,000,000 _3,100,000 (P 100,000)
177 Chapter 10
10-5:
10-6:
10-7:
b Total cost to date, 2013 (4,800,000 X 60%) Less: Cost incurred in 2010 (4,500,000 X 20%) Cost incurred in 2013
P2,880,000 __900,000 P1,980,000
a Percentage of Completion Method: Contract Price Less: Total estimated cost (900,000/1,800,000) Estimated gross profit % of completion (900,000/2,700,000) Gross profit recognized, 2012 Add: Cost Incurred Construction in Progress - 2012
P3,000,000 _2,700,000 300,000 ___33.33% 100,000 ___900,000 P 1,000,000
Zero Profit Method: Cost incurred to Construction in Progress - 2012
P 900,000
a Contract Price Less: Total estimated cost Estimated gross profit % of completion Gross Profit earned to date Gross Profit earned in prior year Gross Profit earned this year
10-8:
b Collections: Contract Billings Less: Accounts receivable Collections Initial Gross Profit: Contract Price Gross Profit rate: Income recognized Divide by Construction in Progress Initial Gross Profit
2012 2013 P4,200,000 P4,200,000 _3,000,000 _3,750,000 1,200,000 450,000 _____20% ____100% 240,000 450,000 _______– __240,000 P 240,000 P 210,000
P 47,000 ___15,000 P 32,000 P 800,000 10,000 50,000 =_____20% P 160,000
Long-Term Construction Contracts
10-9:
a Gross profit (loss) earned in 2013 Gross profit earned in prior years Gross profit earned to date - 2013 Divide by percentage of completion - 2013 Estimated gross profit - 2013 Less: Contract price Total estimated cost Less: Cost incurred - 2013 Cost incurred to date - 2012 Less: Cost incurred - 2011 Cost incurred in 2012
(P 20,000) _180,000 160,000 ___100% 160,000 2,000,000 1,840,000 _820,000 1,020,000 __360,000 P 660,000
10-10: b Gross profit earned to date - 2012 (P40,000 + P140,000) Divide by estimated gross profit - 2012: Contract price P2,000,000 Gross profit rate [180,000/(1,020,000 + 180,000)] ___X 15% Percentage of completion - 2012
P 180,000 __300,000 60%
10-11: a, Refer to Q 10-10 solutions. 10-12: d Contract price Estimated gross profit - 2012 (Refer to Q 10-10) Total estimated cost Less: Cost incurred to date - 2012 (refer to Q 10-9) Estimated cost to complete - 2012
P2,000,000 __300,000 1,700,000 1,020,000 P 680,000
10-13: d 2012: Construction in progress Less: Construction costs Gross profit recognized - 2012
P 244,000 __210,000 P 34,000
2013: Construction in progress (P728,000-P244,000) Less: Construction costs Gross profit recognized - 2013
P 484,000 __384,000 P 100,000
179 Chapter 10
10-14:
d Project 1 Project 2 Percentage of Completion Method: Contract price P 300,000 Less: Total estimated cost Cost incurred to date - 2013 P 280,000 Estimated cost to complete ___70,000 Total __350,000 Estimated gross profit (Loss) (50,000) Percentage of completion _______– Profit (loss) to be recognized (P 50,000) Total is (P10,000)
P 420,000 P 240,000 __120,000 __360,000 60,000 __66.67% P 40,000
Zero Profit Method - The loss (P50,000) for project 2 only. 10-15: a Contract price (cost X 120%) P3,744,000 Less: Total estimated costs (1) Cost incurred to date 3,120,000 Estimated cost to complete ________– (2) Total _3,120,000 Estimated gross profit 624,000 Percentage of completion (1 2) ____100% Gross profit earned to date 624,000 Gross profit earned in prior years __477,360 Gross profit earned this year 146,640
2011 2012 2013 P3,744,000 P3,744,000 546,000
1,544,400
_2,054,000 _1,315,000 _2,600,000 _2,860,000 1,144,000
884,000
_____20%
_____54%
240,240
477,360
_______–
__240,240
P 240,240
P 237,120
10-16: d Contract price P6,300,000 Less: Total estimated cost Cost incurred to date 3,040,000 Estimated cost to complete _1,960,000 Total P5,000,000 Estimated gross profit 1,300,000 Percentage of completion: 2012 (1,425,000 - 50,000) 5,500,000 2013 (3,040,000 - 50,000) 5,000,000 __59.80% Profit earned to date 777,400 Less: Gross profit earned in prior year __200,000 Gross profit earned this year P 577,400
2012 2013 P6,300,000 1,425,000 _4,075,000 P5,500,000 800,000 25% ________– 200,000 ________– P 200,000
Long-Term Construction Contracts
10-17:
a Cash collections: Progress billings Less: Accounts receivable, end Collection
P1,500,000 __500,000 P1,000,000
Cost incurred to date: Construction in Progress Less: Gross profit earned Cost incurred to date 10-18: d Percentage of Completion Method:
Contract price 2,520,000 Less: Total Estimated Costs (1) Cost incurred to date
P1,600,000 __200,000 P1,400,000 Apartment A 2012 2013 1,620,000 1,620,000
Apartment B 2012 2013 2,520,000
P 600,000 P1,200,000 P1,560,000
P2,310,000 Estimated cost to complete (2) Total estimated cost 2,310,000 Estimated Gross Profit 210,000 Percentage of completion (1 2) _100.00% Gross profit earned to date 210,000 Less: Gross profit earned in Prior years __187,200 Gross Profit earned this year 22,800 Total Gross Profit 2013 (P75,000 + P22,800)
840,000 1,440,000
240,000 1,440,000
690,000 2,250,000
180,000
180,000
270,000
_41.67%
_83.33%
_69.33%
75,000
150,000
187,200
_______–
___75,000
_______–
P 75,000
P 75,000
P 187,000
P97,800
Zero Profit Method : P210,000 gross profit earned in 2013 for Apartment B. 10-19: d 2012 Contract price: 2012 2013 (P6,000,000-P50,000) P5,950,000 Less: Total estimated costs (1) Cost incurred to date 2,650,000 Estimated cost to complete (2) Total estimated cost 2,650,000 Estimated Gross Profit 3,300,000 Percentage of completion (1 2) ___100% Gross profit earned to date 3,300,000 Less: Gross profit earned in Prior year 3,060,000 Gross Profit earned this year
2013
P6,000,000 _________ 2,340,000 260,000 2,600,000 3,400,000 ____90% 3,060,000 _______– P3,060,000
240,000
181 Chapter 10
10-20:
a 2011
2012
2013
(1)Cost incurred to date P6,150,000 (2)Estimated cost to complete (3)Total Estimated Costs 6,150,000
P3,400,000 1,600,000 5,000,000
Percentage of completion (1 3) Contract price P6,000,000 Less: Total estimated cost 6,150,000 Estimated Gross Profit (150,000) Percentage of completion Gross profit earned (loss) to date (150,000) Add: Cost incurred to date 6,150,000 Construction in Progress 6,000,000 Less: Contract billings 6,000,000 Balance
68% P6,000,000 5,000,000
P5,950,000 150,000 6,100,000 98% P6,000,000 6,100,000
1,000,000
(100,000)
68% 680,000
100% (100,000)
3,400,000 4,080,000
5,950,000 5,850,000
3,200,000
5,200,000
P 880,000
P 650,000
10-21: d Construction in Progress: Cost incurred to date, 2012 Gross profit (loss), 2012 (Schedule 1) P2,500,000 Less: Contract billings, 2011 (P3,250,000 x 75%) 2,437,500
P2,625,000 (125,000)
Excess of Construction in Progress over Contract Billings (CA) P 62,500 Schedule 1 – Computation of gross profit earned: Contract price P3,250,000 Total estimated cost: Cost to date 2,625,000 Estimated cost to complete 750,000 Total 3,375,000
2009 P3,250,000 1,075,000 1,612,500 2,687,500
Estimated gross profit (loss) (125,000) % of completion
562,500
Gross profit (loss) to date (125,000) Gross profit earned in prior years 225,000
225,000
40%
–
Gross profit earned this year P(350,000)
P 225,000
10-22: b 2010 2011 P2,800,000 P2,800,000
Contract price P2,800,000 Estimated cost: Cost to date 2,440,000 Estimated costs to complete 380,000
1,300,000 1,360,000
Total 2,820,000
10-23:
780,000
2,660,000
Estimated gross profit (20,000) % of completion RGP to date RGP in prior years RGP each year Long-Term Construction Contracts
1,960,000
2,740,000
140,000
60,000
48.87% 68,418 68,418
71.53% 42,918 68,418 (25,500)
(20,000) 42,918 (62,918)
a 2012
Project A
Project B
P2,900,000
P3,400,000
1,680,000 1,120,000
1,440,000 1,760,000
Project
C Contract price P 1,700,000 Estimated costs: Cost to date Estimated cost to complete 960,000 Total 1,280,000
2,800,000
3,200,000
Estimated gross profit % of completion
100,000 60%
200,000 45%
Gross profit earned this year (P255,000) P 105,000
P 60,000
P 90,000
Project A
Project B
Project C
P2,900,000
P3,400,000
P1,700,000
2,120,000 –0–
1,183,000 1,360,000
560,000 117,000
2,640,000
3,480,000
1,300,000
2013
320,000
420,000
Project
D Contract price P 2,000,000 Estimated costs Cost to date2,640,000 Estimated costs to complete 1,040,000 Total 1,600,000 Estimated gross profit (loss) % of completion
260,000 100%
Gross profit (loss) to date Gross profit earned in prior year
260,000 60,000
Gross profit earned this year(P429,000)
P 200,000
(80,000) –
400,000 91%
400,000
(80,000) 364,000 90,000 105,000
140,000
P(170,000)
P 140,000 2012 P 255,000
Gross profit earned P 429,000 General and administrative expenses
120,000
Net income P 309,000
120,000
P 135,000
10-24: c Contract price P10,000,000 Gross profit earned to date, 2012 (P900,000 – P100,000)
800,000
Total cost to date, 2013 9,200,000 Less: cost incurred in 2013 4,100,000 Cost to date, 2012 P 5,100,000 Gross profit earned to date
P
900,000 Divided by % of completion: (P5,100,000 + P900,000) / P10,000,000 Estimated gross profit, 2012 P 1,500,000
10-25: d Construction in progress: Cost incurred to date P 440,000 Gross profit earned to date (P2,500,000 – P2,000,000)
110,000
Total Less: Contract billings (P2,500,000 x 30%)
550,000 750,000
Excess of contract billings over construction in progress (CL) P( 200,000) 183 Chapter 10
10-26:
a Contract price Total estimated cost: Cost incurred to date: Site labor cost Cost of construction materials Depreciation of special plant & equip Total Estimated cost to complete Estimated gross profit Percentage of completion (45/100)
P120,000,000 10,000,000 30,000,000 5,000,000 45,000,000 55,000,000
100,000,000 20,000,000 45%
Gross profit to be recognized 10-27:
P 9,000,000
a Cost incurred to date- 2012 Total estimated cost (8,000,000 / 40%) Estimated cost to complete Cost incurred in 2012
20,000,000 8,000,000
3,700,000 Cost incurred in 2011 Estimated cost at completion- 2011 Total estimated cost- 2011
P12,000,000 3,700,000
8,300,000 12,450,000 P20,750,000
Percentage of completion- 2009 (8,300,000/ 20,750,000) = 40% 10-28:
a 2012 Contract price Total estimated cost: Cost incurred to date Estimated cost to complete Total estimated cost Estimated gross profit Percentage of completion Gross profit recognized
Contract 1 P600,000
Contract 2 P450,000
150,000 150,000 300,000 300,000 50% P150,000
87,500 162,500 250,000 200,000 35% P70,000
2013 Contract 1 600,000 350,000 250,000 80% 200,000 150,000 50,000
Contract price Total estimated cost Estimated gross profit Percentage of completion Gross profit earned to date Gross profit earned in 2012 Gross profit earned this year
Contract 2 450,000 300,000 150,000 60% 90,000 70,000 20,000
Actual cost incurred to date Gross profit earned to date (P220,000 P214,000) Construction in Progress, 12/31/013
Contract 3 900,000 500,000 400,000 36% 144,000 144,000 P 640,000 434,000 P1,074,000
Long-Term Construction Contracts
10-29:
a Contract price Total estimated cost Cost incurred
Bicol P875,000 656,250
Davao Aklan P1,225,000 P437,500 175,000
175,000
Total 1,006,250
Est. cost to complete Total estimated cost 656,250 Estimated gross profit 218,750 Percentage of completion 100% Gross profit earned P218,750 Total cost incurred Total gross profit earned Construction in progress Less: Billings Due from (to) 10-30:
175,000 350,000 87,500 50% P43,750
Percentage of completion 1,006,250 332,500 1,338,750 1,312,500 26,250
a Contract price Total estimated cost: Cost incurred Estimated cost to complete Estimated gross profit Percentage of completion Gross profit recognized
10-31:
700,000 875,000 350,000 20% P 70,000
332,500
Zero Profit 1,006,250 218,750 1,225,000 1,312,500 (87,500) P40,825,000
8,475,000 28,400,000
36,875,000 3,950,000 22.983% P 907,830
a Cost of direct materials used Cost of direct labor, including supervision Cost of indirect materials used Depreciation of plant and equipment used on the contract Payroll of design and technical department Insurance costs Costs of contracted research and development activities General and administrative expenses Borrowing costs Total cost incurred to date
P220,000 150,000 55,000 120,000 80,000 60,000 105,000 30,000 130,000 P930,000
Estimated gross profit (P2,950,000 – P2,600,000) % of completion (P930,000 / P2,600,000) Realized gross profit
P350,000 35.77% P125,195
185 Chapter 10
10-32: 1.
a
Contract price
Project 1 P420,000
Project 2 P150,000
Less total estimated costs Estimated gross profit (loss) % of completion: Project 1 (P120,000 / P180,000) Project 2 Realized gross profit (loss) Expenses Net income (loss), Dec. 31, 2013, P120,000
2.
180,000 240,000
175,000 (25,000)
66.67% 160,000 10,000 P150,000
100% (25,000) 5,000 P(30,000)
a, Project 2 only.
10-33: a Contract price Total estimated costs Estimated gross profit % of completion * Realized gross profit
AA P384,000,000 350,240,000 33,760,000 5% P1,688,000
BB P35,000,000 30,552,000 4,448,000 75% P3,336,000
CC P175,000,000 143,640,000 31,360,000 75% P23,520,000
DD P99,400,000 91,200,000 8,200,000 50% P4,100,000
* Actual cost incurred / Total estimated cost.
Total realized gross profit P 32,644,000 Total cost incurred to date 193,756,000 Construction in progress 226,400,000 Billings: Contract signing (P693,400,000 x 20%) P 138,680,000 AA: P384,000,000 – (384,000 x 20%) x 5% 15,360,000 BB: P35,000,000 – (35,000,000 x 20%) x 75% 21,000,000 CC: P175,000,000 – (P175,000 x 20%) x 75% 105,000,000 DD: P99,400 - (P99,400 x 20%) x 50% 39,760,000 319,800,000 Due to P 93,400,000 10-34:
b (P1.2 Billion x 10%)
Long-Term Construction Contracts
10-35:
Supporting Computation: Contract price
2011 P6,600,000
2012 P6,600,000
2013 P6,600,000
Reduction due to delay Net contract price Less total estimated cost: Cost incurred to date Estimated costs to complete Total Estimated gross profit % of completion (CITD / TEC) Realized gross profit to date Realized gross profit in prior years Realized gross profit (loss) this year
1.
2.
3.
6,600,000
6,600,000
90,000 5,910,000
1,782,000 3,618,000 5,400,000 5,400,000 33% 396,000 P396,000
3,850,000 1,650,000 5,500,000 5,500,000 70% 770,000 396,000 P374,000
5,500,000 5,500,000 5,500,000 100% 410,000 770,000 P(360,000)
a Realized gross profit Operating expenses Net income
P374,000 90,000 P284,000
a Construction in progress (P770,000 + P3,850,000) Contract billings Balance
P4,620,000 3,100,000 P1,520,000
a Construction in progress Contract billings Balance
P2,850,000 3,100,000 750,000
187
Chapter 10
SOLUTIONS TO PROBLEMS Problem 10 – 1 (a)
2012
2013
Contract Price P 450,000 Less: Total estimated cost (1) Cost incurred to date Estimated costs to complete _______– (2) Total _320,000 Estimated gross profit Percentage of completion (1 2) ___100% Estimated gross profit to date Less: Gross profit earned in prior year __100,000 Gross profit earned this year 30,000 (b)
Contract Price P 450,000 Less: Total cost incurred __320,000 Gross profit P 130,000
(c)
2012: Construction in Progress Cost of construction Construction Revenue 300,000 2013: Construction in Progress Cost of Construction Construction Revenue 350,000
P 450,000 200,000 __100,000
320,000
__300,000 150,000 ______2/3
130,000
100,000 _______–
130,000
P 100,000P
100,000 200,000 30,000 320,000 Problem 10 – 2
(a)
Construction Revenue P1,250,000 Less: Cost incurred _1,250,000 Gross profit – 2013
0– Construction in Progress (cost incurred) P1,250,000 Less: Contract billings (P5,800,000 x 30%) _1,740,000 Billings in excess of related costs P(490,000) (b)
Contract price
P
P5,800,000 Less: Total estimated costs Cost incurred to date Estimated costs to complete 5,000,000 Estimated gross profit Percentage of Completion (P1,250,000 500,000) _____25% Gross profit P 200,000
P1,250,000 3,740,000 800,000
Construction on Progress (P1,250,000 + P200,000) P1,450,000 Less: Contract billings _1,740,000 Billings in excess of related costs P(290,000) Long-Term Construction Contracts
188
Problem 10 – 3 2010 P55,000,000
(a)
Contract Price P55,000,000 Less: Total estimated costs (1) Cost incurred to date 50,000,000 Estimated costs to complete ________– (2) Total 50,000,000 Estimated gross profit 5,120,000 Percentage of completion (1 2) ____100% Gross profit earned to date 5,000,000 Gross profit earned in prior yr(s) _3,500,000 Gross profit earned the year P 1,500,000
2011 P55,000,000
2012 P55,000,000
15,000,000
25,000,000
35,000,000
_35,000,000
25,000,000
15,000,000
_50,000,000
50,000,000
50,000,000
5,000,000
5,000,000
5,000,000
______30%
_____50%
_____70%
1,500,000
2,500,000
3,500,000
________–
_1,500,000
_2,500,000
P 1,500,000
P 1,000,000
P 1,000,000
(b)
2012 (1) Construction in Progress Cash or Payable 15,000,000
15,000,000
(2) Accounts Receivable Contract Billings
15,000,000
2013 15,000,000
15,000,000 20,000,000 15,000,000
2013
20,000,000 (3) Cash Accounts Receivable 25,000,000
12,000,000
(4) Construction in Progress Cost of Construction Construction Revenue 16,500,000
1,000,000 15,000,000
25,000,000 12,000,000 1,500,000 15,000,000 16,000,000
Problem 10 – 4 (a) Cost incurred to date P10,000,000 Divide by total estimated cost _12,000,000 Percentage of Completion
(b)
Contract Price P15,000,000 Less: Total Estimated Cost Cost incurred to date 10,000,000 Estimated costs to complete __2,000,000 Total _12,000,000 Estimated gross profit 3,000,000 Percentage of completion ___83.33% Gross profit earned to date 9,500,000 Less: Gross profit earned in prior yrs. _2,000,000 Gross profit earned this year P 500,000
2011 P 1,000,000
2012 P 5,500,000
P 9,000,000
P11,000,000
11.11%
50%
2011 P15,000,000
2012 P15,000,000
1,000,000
5,500,000
__8,000,000
__5,500,000
__9,000,000
_11,000,000
6,000,000
4,000,000
___11.11%
______50%
666,600
2000,000
________–
___666,600
P 666,600
P 1,333,400
189 10 Problem 10-4, continued:
(c)
2013
83.33% 2013
Chapter
(1) Construction in progress (cost incurred) Cash 1,000,000
1,000,000
(2) Accounts Receivable Contract Billings
1,325,000
1,325,000 (3) Cash Accounts Receivable 1,200,000
1,200,000
(4) Construction in progress (gross profit) Cost of construction Construction Revenue 1,666,600
666,600 1,000,000
Problem 10 – 5 (1)
2010 P14,000,000
Contract Price P14,000,000 Less: Total Estimated Cost Cost incurred to date 6,500,000 13,900,000 Estimated cost to complete __6,800,000 ________– Total _13,300,000 13,900,000 Estimated gross profit 700,000 Percentage of completion ___48.87% ____100% Gross profit (loss) to date 342,090 Less: Gross profit (loss) in prior yrs. ________– ( 100,000) Gross profit (loss) this year P 342,090 200,000 (2)
2010
2011 P14,000,000
2012 P14,000,000
9,800,000
12,200,000
_3,900,000
_1,900,000
13,700,000
14,100,000
300,000 ___71.53%
( 100,000) _____100%
100,000
214,590 ___342,090
( 100,000) ___214,590
100,000
P( 127,500)
P( 314,590)
2011
2012
2013
2013
Cost of construction 6,500,000 3,300,000 2,400,000 1,700,000 Construction in progress 342,090 127,500 314,590 200,000 Construction Revenue 6,842,090 3,172,500 2,085,410 1,900,000
Problem 10 – 6 (1) Contract Price Less: Total estimated costs Cost incurred to date Estimated costs to complete Total Estimated gross profit Percentage of completion
2010 P 6,000,000
2011 P 6,000,000
2012 P 6,000,000
3,400,000 _2,100,000 _5,500,000 500,000 ___61.82%
5,950,000 ___150,000 _6,100,000 ( 100,000) _______–
6,150,000 ________– _6,150,000 ( 150,000) ________–
Gross profit (loss) to date Gross profit (loss) in prior yrs. Gross profit (loss) this year
309,100 ________– P 309,100
( 100,000) __309,100 P 409,100
( 150,000) ( 100,000) P 50,000
Long-Term Construction Contracts 190
(2) Cost of construction Construction in progress 50,000 Construction Revenue 150,000 (3)
Cash Accounts Receivable Contract Billings Construction in progress
2010 3,400,000 309,100
2011 2,550,000 409,100
3,709,100
2012 200,000
2,140,900
400,000 400,000 6,000,000 6,000,000 Problem 10 – 7
(1)
2011 Contract Price P16,000,000 Less:Total Estimated Cost Cost incurred to date 4,600,000 Estimated costs to complete __9,640,000 Total _14,240,000 Estimated gross profit 1,760,000 Engineer's estimate of comp. ______31% Gross profit to date 545,600 Less: Gross profit earned in prior yrs. ________– Gross profit earned this yr. P 545,600
(2) (a) Construction on progress Cash 5,250,000
2012 P16,000,000
2013 P16,000,000
9,100,000 __5,100,000 _14,200,000 1,800,000 ______58% 1,044,000 __545,600 P 498,410
14,350,000 _________– _14,350,000 1,650,000 _____100% 1,650,000 _1,044,000 P 606,000
2011 4,600,000
2012 4,500,000 4,600,000
(b) Accounts receivable Contract billings 5,000,000
5,000,000
(c) Cash Accounts receivable 6,100,000
4,500,000
(d) Cost of constructions Construction in progress
4,600,000 545,600
2013 5,250,000 4,500,000
6,000,000 5,000,000
5,000,000 6,000,000
5,400,000 4,500,000
6,100,000 5,400,000
4,500,000 498,400
5,250,000 606,000
Construction revenue 5,856,000 (e) Contract billings Construction on progress 16,000,000 (3)
5,145,600
4,998,400 16,000,000
Zero Profit Method: 2013 Entries (a) Construction in progress Cash / accounts payable
5,250,000 5,250,000
(b) Accounts receivable Contract billings
5,000,000 5,000,000
191 Chapter 10 Problem 10-7, continued:
(4)
(c) Cash Accounts receivable
6,100,000
(d) Cost of construction Construction in progress Construction revenue
5,250,000 1,650,000
(e) Contract billings Construction in progress
16,000,000
6,100,000
6,900,000 16,000,000
The following entry would be the only one different from (2). *
Cost of construction Construction in progress Construction revenue 6,720,000 *
2011 2012 2013 4,414,400 3,821,600 6,114,000 545,600 498,400 606,000 4,960,000 4,320,000
Total estimated costs x estimated percentage of completion. Problem 10 – 8
(1) Contract Price P6,500,000 Less:Total Estimated Costs Cost incurred to date 6,850,000 Estimated costs to complete ________– Total _6,850,000 Estimated gross profit (loss) (350,000) Less: Gross profit (loss) in prior yrs. _(250,000)
2011 P6,500,000
2012 P6,500,000
2,150,000
5,250,000
_3,850,000
_1,500,000
_6,000,000
_6,750,000
500,000
(250,000)
________–
___520,000
2013
Gross profit (loss) this years P( 600,000) (2)
P 520,000
P( 250,000)
In 2013 when the project is completed.
Problem 10-9 1. 2. 3. 4. 5. 6.
P20,000 (P220,000 – P200,000) P260,000 (P250,000 + P10,000) P370,000 [P850,000 – (P220,000 + P260,000)] P380,000 (P370,000 + PP10,000) P830,000 (P200,000 + P250,000 + P380,000) P86,095: 2013: 450/640 = 0.7031 x P850,000 = P597,635 Less cost to date 450,000 Gross profit to date 147,635 2012: 200/650 = 0.3077 x P200,000 = (61,540) RGP - 2013 P86,095
Long-Term Construction Contracts 192
Problem 10-10 Building 1 a. Contract price b. Cost to date c. ECTC d. TEC e. Est. GP a-d f. % of comp. b/d g. RGP to date axf h RGP-prior yr i RGP this yr j CITD (b) k CITD prior yr. l CITD this yr. m GP (loss)
Prior To 2013 P4,000,000 2,070,000 1,380,000 3,450,000
Building 2
2013 P4,000,000 3,000,000 750,000 3,750,000
Prior To 2013 P9,000,000 6,318,0000 1,782,000 8,100,000
550,000
250,000
60% 2,400,000 2,400,000 2,070,000 2,070,000 P330,000
Building 3
Bldg. 4
2013 P9,000,000 8,118,000 9,118,000
Prior To 2013 P13,150,000 3,000,000 9,000,000 12,000,000
2013 P13,150,000 10,400,000 2,800,000 13,200,000
2013 P2,500,000 800,000 1,200,000 2,000,000
900,000
882,000
1,150,000
(50,000)
500,000
80%
78%
100%
25%
78.79%
40%
3,200,000 2,400,000 800,000 3,000,000 2,070,000 930,000 P(130,000)
7,020,000 7,020,000 6,318,000 6,318,000 P702,000
9,000,000 7,020,000 1,980,000 8,118,000 6,318,000 1,800,000 P180,000
3,287,500 3,287,500 3,000,000 3,000,000 P287,500
10,360,885 3,287,500 7,073,385 10,410,885* 3,000,000 7,410,885 P(337,500)
1,000,000 1,000,000 800,000 800,000 P200,000
*P10,360,885 + P50,000 = P10,410,885
1 Total revenue all buildings
Prior to 2013 P12,707,500
2013 P10,853,385
Total costs – all buildings Total gross profit – all buildings 2.
Revenue – Building 2 Cost – Building 2 Gross profit Less anticipated loss on Building 3 Gross profit
11,388,000 P1,319,500 P9,000,000 8,118,000 P 882,000 ( 50,000) P 832,000
10,940,885 P (87,500)
