Augusto, Christian Lloyd

Barrera, Chelsie Anne

Kiamco, Tristan Paolo

Pre-Test No. 5 - Long Term Construction Contracts

Problem 1

site labor cost 400,000.00

cost of construction material 800,000.00
depreciation of special p&e 300,000.00
depreciation of other p&e 150,000.00
Cost incurred during 2015 1,650,000.00

2015 2016
Total Contract Price 7,000,000.00 7,000,000.00
Cost incurred to date 1,650,000.00 5,750,000.00
Estimated costs to complete 3,500,000.00
Total Estimated costs 5,150,000.00 5,750,000.00
Expected Gross Profit 1,850,000.00 1,250,000.00
Percentage of Completion 32.04% 100%
Gross Profit Earned to Date 592,740.00 1,250,000.00
Less: GP earned in prior years 592,740.00
GP earned this year 592,740.00 657,260.00

1. Calculate the following

2015 2016
Percentage of completion 32.04% 100%
Revenue 2,242,800.00 4,757,200.00
Costs incurred 1,650,000.00 5,750,000.00
Profit 592,800.00 657,200.00

2. Journal Entries
2015
Construction in Progress 1,650,000.00
Cash 1,650,000.00
Costs incurred

Accounts Receivable 1,200,000.00

Contract Billings 1,200,000.00
Progress billings

Cash 1,000,000.00
Accounts Receivable 1,000,000.00
 Billings collections

Construction in Progress 592,800.00

Cost of Construction 1,650,000.00
Construction Revenue 2,242,800.00
Revenue recognition

2016
Construction in Progress 4,100,000.00
Cash 4,100,000.00
Costs incurred

Accounts Receivable 4,800,000.00

Contract Billings 4,800,000.00
Progress billings

Cash 3,700,000.00
Accounts Receivable 3,700,000.00
Billings collections

Construction in Progress 657,200.00

Cost of Construction 4,100,000.00
Construction Revenue 4,757,200.00
Revenue recognition

Problem 2

Construction Expenses, 2015 150,000.00

Loss,2015 (28,000.00)
Construction in Progress, 2015 122,000.00
Construction Expenses,2016 192,000.00
Profit,2016 50,000.00
Construction in Progress, 2016 364,000.00

Profit recognized P 50,000

Problem 3

Project 1 Project 2
Contract Price 420,000 300,000
Cost Incurred 240,000 280,000
Estimated Cost to Complete 120,000 40,000
Total Estimated Costs 360,000 320,000
Estimated Gross Profit 60,000 (20,000)
Percentage of Completion 66.67% 100%
Recognized GP to date 40,000 (20,000)

Percentage-of-completion method
Recognized gross profit:
Project 1 40,000.00
Project 2 (20,000.00)
Gross Profit 20,000.00

Completed Contract method

Recognized gross profit:
Project 1
Project 2 (20,000.00)
Gross Loss (20,000.00)

Problem 4

PULAG PATOC
9-30-2015 9-30-2016 9-30-2015 9-30-2016
Contract Price 600,000.00
Penalties (40,000.00)
Contract Price 600,000 560,000 800,000 840,000
Cost Incurred 360,000 450,000 410,000 720,000
Estimated Cost to Complete 40,000 410,000 180,000
Total Estimated Costs 400,000 450,000 820,000 900,000
Estimated Gross Profit 200,000 110,000 (20,000) (60,000)
Percentage of Completion 90.00% 100% 100.00% 100%
Recognized GP to date 180,000 110,000 (20,000) (60,000)
Less: GP prior year 180,000 (20,000)
GP earned 180,000 (70,000) (20,000) (40,000)