PROBLEM A. On June 1, 2013, Nelly Builders obtained a contract to build a bridge.

The bridge was to be built at a total cost of P12,500,000 and is scheduled for completion by May 31, 2015. The contract contains a penalty clause to the effect that the client will deduct P25,000 from the P15,000,000 contract price for each week of delay. Completion was delayed by five weeks. Pertinent information are as follows: Costs incurred to date Estimated costs to complete Cash collections 2013 P1,250,000 5,000,000 1,000,000 2014 P5,850,000 650,000 10,875,000 2015 P6,625,000 7,437,500

1. How much is the realized gross profit (loss) for the year 2015? 2. What is the ending balance of the construction in progress account at the end of 2014? 3. How much is the construction revenue for the year 2014 and 2015? PROBLEM B. On January 31, 2013, North Construction won a bidding to build an athletic stadium. The project was to be built at a total cost of P5,500,000 and was scheduled for completion by September 30, 2015. One of the stipulations was that the client will deduct P15,000 from the P6,600,000 contract price for each week that the completion was delayed. Completion was delayed six weeks. Data related to the project were as follows: Costs incurred each year Estimated costs to complete Contract billings each year Cash collections each year Operating expenses 2013 P1,782,000 3,618,000 1,200,000 1,000,000 100,000 2014 P2,068,000 1,650,000 1,900,000 1,800,000 90,000 2015 P1,650,000 ? 3,710,000 70,000

A. Using the percentage of completion method: 1. How much is the net income for the year 2013? 2. What is the balance of construction in progress net of progress billings at December 31, 2013? 3. How much is the construction revenue for the year 2013? 4. How much is the net income for the year 2014? 5. What is the balance of construction in progress net of progress billings at December 31, 2014? 6. How much is the construction revenue for the year 2014? 7. How much is the net income for the year 2015? 8. How much is the construction revenue for the year 2015? B. Using the zero profit method: 1. How much is the net income for the year 2013? 2. What is the balance of construction in progress net of progress billings at December 31, 2013? 3. How much is the construction revenue for the year 2013? 4. How much is the net income for the year 2014?

5. What is the balance of construction in progress net of progress billings at December 31, 2014? 6. How much is the construction revenue for the year 2014? 7. How much is the net income for the year 2015? 8. How much is the construction revenue for the year 2015? PROBLEM C. On January 2, 2013, Star Construction Company enters into a contract to construct a 15-storey building for P40,000,000. During the construction period many change orders are made to the original contract. Both the customer and the contractor accepted all of the changes. The following schedule summarizes the change orders in 2013: Cost incurred in 2013 P8,000,000 50,000 300,000 125,000 Estimated costs to complete P28,000,000 50,000 50,000 300,000 Contract price P40,000,000 125,000 600,000 100,000

Basic contract Change order #1 Change order #2 Change order #3 Change order #4

1. How much is the gross profit to be recognized for the year 2013 under the percentage of completion method? PROBLEM D. A construction company has landed a contract for the construction of an office building. At the beginning of 2013, one project is in progress. The following data describes the status of the building at the beginning of the year: Contract price Cost incurred to 1/1/13 (including P50,000 worth of materials stored at the site to be used in 2014 to complete the project) Estimated costs to complete, 1/1/13 P6,300,000 1,425,000 4,075,000

During 2013, the following data were obtained with respect to the same building: Cost incurred to date Cost to complete, 12/31/13 P3,040,000 1,960,000

1. What is the realized gross profit (loss) to be reported for the year 2013 using the percentage of completion?