LONG-TERM CONSTRUCTION CONTRACTS

1. On July 1, 2016, ABC Construction Corp. contracted to build an office building for XYZ Inc. for
a total contract price of P975,000.
2016 2017 2018
Contract cost incurred to date 75,000 600,000 1,050,000
Estimated costs to complete the contract 675,000 400,000
Billings to XYZ Inc. 150,000 550,000 275,000

1. Under the percentage of completion method, how much is the Construction-in- Progress at
December 31, 2017?
A. 650,000
B. 575,000
C. 672,000
D. 597,500
2. Under the zero-profit method, how much is the Construction-in-Progress, net of Progress
Billings at December 31, 2017?
A. (125,000)
B. 125,000
C. 50,000
D. (50,000)

3. Under the percentage of completion method, how much is the realized gross profit/(loss)
December 31, 2018?
A. (75,000)
B. (100,000)
C. (50,000)
D. (72,000)

2. EFG Construction was really awarded a P6,730,000 contract to construct a trade center for
Ayala Inc. EFG Construction it will estimates it will take 46 months to complete the contract.
The company uses the percentage of completion method to estimate profits. (use two
decimal places for the percentage of completion). Example 62.48%

The following information details the actual and estimated costs for the year 2017-2020:
Year Actual Cost Each Year Estimated Cost to Complete
2017 3,120,000 3,264,000
2018 1,584,000 1,800,000
2019 1,152,000 912,000
2020 1,080,000
How much is the balance of Construction in Progress account as of 2019?
A. 5,818,000
B. 5,856,000
C. 5,808,000
D. 5,800,000
3. DM. Inc. works on a P10,500,000 contract In 2016 to construct an office building. During
2016, DM, Inc. uses the cost to cost method. At December 31, 2016, the balances In certain
accounts were:

Construction in progress – P3,780,000

Accounts receivable – P360,0000
Billings on construction in process P1,800,000
Contract retention – P180,000
Mobilization fee – P140,000.
At December 31, 2016, the estimated cost at completion is P7,350,000.

How much is the realized gross profit in 2016?

A. 1,102,500
B. 1,062,500
C. 1,242,500
D. 1,134,000

4. On January 1, 2016, Brave Construction Corporation began constructing a P2,100,000

contract . The entity used the percentage of completion method. For the year ended
December 31, 2017 , Brave Construction billed its client an additional 55% of the contract
price.

Construction in progress 2016 2017

2018
Estimated costs to complete 441,000 ?
?
Costs incurred 425,250 969,000
675,750
Excess of construction in progress over billings (84,000) (330,750)

1. How much is the estimated remaining cost in 2016?

A. 1,599,750
B. 1,555,000
C. 1,680,000
D. 1,584,000
2. How much is the realized gross profit (loss) in 2017?
A. (45,000)
B. 15,750
C. (60,750)
D. 30,000
3. How much is the balances of construction in progress in 2017?
A. 1,680.000
B. 2,010,750
C. 1,349,250
D. 1,365,000