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    LTCC

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    Friedy Chicken
    bsa

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    © All Rights Reserved
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    LTCC

    Uploaded by

    Friedy Chicken
    36 views3 pages
    bsa

    Copyright

    © © All Rights Reserved

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    bsa

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    36 views3 pages

    LTCC

    Uploaded by

    Friedy Chicken
    bsa

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    LONG-TERM CONSTRUCTION CONTRACTS

    PROBLEM-SOLVING:

    1. On January 1, 2021, Entity A accepted a long-term construction project to build a condominium at a


    fixed contract price of P100,000. The outcome of the construction project can be estimated reliably.
    The following data are provided by the accountant and project manager concerning the construction
    costs for the three years of construction:

    Year 12/31/2021 12/31/2022 12/31/2023


    Costs incurred during the year P 50,000 P 10,000 P 10,000
    Estimated cost to complete at the end of the year P 75,000 P 60,000 P 10,000

    1) What is the realized gross profit (loss) to be recognized by Entity A for the year ended
    December 31, 2021?
    a. Zero
    b. P 5,000
    c. P (25,000)
    d. P 10,000

    2) What is the realized gross profit (loss) to be recognized by Entity A for the year ended
    December 31, 2022?
    a. Zero
    b. P 5,000
    c. P (25,000)
    d. P 10,000

    3) What is the realized gross profit (loss) to be recognized by Entity A for the year ended
    December 31, 2023?
    a. Zero
    b. P (10,000)
    c. P 17,500
    d. P 37,500

    4) What is the Construction cost of sales to be recognized in the Income Statement for the year ended
    December 31, 2021?
    a. Zero
    b. P 5,000
    c. P 50,000
    d. P 65,000

    5) What is the Construction cost of sales to be recognized in the Income Statement for the year ended
    December 31, 2022?
    a. Zero
    b. P 5,000
    c. P 50,000
    d. P 65,000

    6) What is the Construction cost of sales to be recognized in the Income Statement for the year ended
    December 31, 2023?
    a. Zero

    Page 1 of 3
    b. P 5,000
    c. P 50,000
    d. P 65,000

    7) What is the balance of construction in progress on December 31, 2022?


    a. P 60,000
    b. P 40,000
    c. P 50,000
    d. P 70,000

    8) What is the balance of construction in progress on December 31, 2023?


    a. P 57,500
    b. P 67,500
    c. P 77,500
    d. P 87,500

    2. On January 1, 2021, Entity A accepted a long-term construction project to build a condominium at a


    fixed contract price of P100,000. The outcome of the construction project cannot be estimated
    reliably. The following data are provided by the accountant and project manager concerning the
    construction costs for the three years of construction:

    Year 12/31/2021 12/31/2022 12/31/2023


    Costs incurred during the year P 50,000 P 10,000 P 10,000
    Estimated cost to complete at the end of the year P 75,000 P 60,000 P 10,000

    1) What is the realized gross profit (loss) to be recognized by Entity A for the year ended December
    31, 2021?
    a. Zero
    b. P 5,000
    c. P (25,000)
    d. P 10,000

    2) What is the realized gross profit (loss) to be recognized by Entity A for the year ended
    December 31, 2022?
    a. P Zero
    b. P 5,000
    c. P (25,000)
    d. P 10,000

    3) What is the realized gross profit (loss) to be recognized by Entity A for the year ended
    December 31, 2023?
    a. Zero
    b. P 20,000
    c. P (30,000)
    d. P 10,000

    4) What is the Construction cost of sales to be recognized in the Income Statement for the year ended
    December 31, 2021?
    a. P 10,000
    b. P 30.000
    c. P 40,000
    d. P 50,000
    Page 2 of 3
    5) What is the Construction cost of sales to be recognized in the Income Statement for the year ended
    December 31, 2022?
    a. P 10,000
    b. P 30.000
    c. P 40,000
    d. P 50,000

    6) What is the Construction cost of sales to be recognized in the Income Statement for the year ended
    December 31, 2023?
    a. P 10,000
    b. P 30.000
    c. P 40,000
    d. P 50,000

    7) What is the balance of construction in progress on December 31, 2022?


    a. P 60,000
    b. P 40,000
    c. P 50,000
    d. P 70,000

    8) What is the balance of construction in progress on December 31, 2023?


    a. P 60,000
    b. P 40,000
    c. P 50,000
    d. P 70,000

    3. On January 1, 2021, Entity A entered into a contract for the construction of a building at an original
    price of P2,000,000 to be completed on June 30, 2023 subject to penalty of P500,000 on the year it
    becomes virtually certain that construction will not be completed on the date agreed upon. On
    January 1, 2022, the contract price increased by P2,500,000 due to the change in the design of the
    building requested by the customer. The outcome of the construction can be estimated reliably.

    12/31/2021 12/31/2022 12/31/2023


    Cumulative costs incurred as of the end of the year 600,000 3,075,000 3,780,000
    Estimated remaining cost to complete at the end of
    the year 900,000 1,025,000 420,000

    1) What is the realized gross profit (loss) to be recognized by Entity A for the year ended
    December 31, 2023?
    a. 200,000
    b. (30,000)
    c. (500,000)
    d. 270,000

    Page 3 of 3

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