INTEGRATED REVIEW 2:  

Advanced Financial Accounting and Reporting (AFAR)

#3 | Installment Sales & Long-term Construction Contracts

 Part I: Installment Sales (1-140)

1. Under
Under the
the cost
cost recover
recovery y meth
method,od,
A. The initial collections on the sale are treated as recovery of the cost of the
inven
nvento
torry sold.
old. Th
Thus
us,, no gros
grosss prof
profit
it or inte
intere
resst inco
income
me is reco
recogn
gniz
ized
ed unti
untill total
otal
collections from the sale equals the cost of inventory sold.
B. The initial collections on the sale are treated as recovery of the cost of the
inve
invent
ntor
oryy sold
sold.. Th
Thus
us,, no gros
grosss prof
profit
it is reco
recogn
gniz
ized
ed unti
untill tota
totall coll
collec
ecti
tion
onss from
from the
the
sale
sale equa
equalsls the
the cost
cost of inve
invent
ntor
oryy sold
sold.. Howe
Howeve ver,
r, inte
intere
rest
st inco
incomeme may
may none
noneththel
eles
esss
 be recognized.
C. A or B.
D. None
None of thes
these.
e.
(Millan, 2016)

2. Under the install

installment
ment sales
sales method,
method, an “over allowance
allowance is”
is”
A. Treated as addition to the installment sale price when computing for the gross
 profit rate.
B. Treate
ated as reduc
duction to the inst
nstallment sale
ale price when
hen com
computing for the gross
 profit rate.
C. Not
Not acc
accoun
ounte
ted
d for
for
D. None
None ofof the
these
se
(Millan, 2016)

3. The excess of trade-in value over the fair value of a traded-in merchandise in a sale
accounted for under the installment sales method represents
A. Over
Over allo
allowa
wance
nce
B. Unde
Underr allo
allowa
wance
nce
C. No allo
allowa
wancncee
D. Smal
Smalll allo
allowa
wanc
ncee
(Millan, 2016)

4. Merchandise
Merchandise received
received as trade-in
trade-in is recognized
recognized at
A. Fair
Fair valu
valuee
B. Orig
Origin
inal
al cos
costt
C. Curr
Curren
entt cos
costt
D. Any
Any ofof the
these
se
(Millan, 2016)
5. For purposes
purposes of
of applying
applying the installment
installment sales method, “fair value” is is
A. The appraised
appraised value of the repossesse
repossessedd property or traded-in
traded-in merchandi
merchandise se
B. Th
Thee esti
estima
mate
tedd sell
sellin
ing
g pric
pricee of the
the repo
reposs
sses
esssed prop
propererty
ty or trade
raded-d-in
in merch
erchan
andi
disse
less
less reco
recond
ndit
itio
ioni
ning
ng cost
costss and
and norm
normal
al prof
profit
it marg
margin
in,, at date
date of repo
reposs
sses
essi
sion
on or date
date
of trade-in.
C. A or B
D. None
None ofof the
these
se
(Millan, 2016)

6. Oliver
ver Co. uses the installment
ent sales
ales meth
ethod.
od. When an accaccount
unt had a balan
alancce of P8,4
8,400,
no furt
urther collect
ections could
uld be made and the dining room set was repo epossessed. At that
tim
time, it was
was est
estimat
imated
ed that
hat the
the dini
dining
ng room
room set coul
couldd be sold
sold for P2,4
P2,400
00 as repo
reposs
sses
esssed or 
for
for P3,0
P3,000
00 if the com
company
pany spend
pend P300
P300 reco
recond
ndit
itio
ioni
ning
ng it.
it. Th
Thee gros
grosss prof
profit
it rate
ate on this
his sale
ale
was 70%. The gain or loss on repossession was a
A. P5,8
P5,880
80 loss
loss
B. P6,0
P6,000
00 loss
loss
C. P 600
600 gai
gainn
D. P 180
180 gain
gain
(Dayag, 2015)

7. The Molino Furniture Company appropriately used the installment sales method in
acco
accoun
untting
ing for the follo
ollowi
wing
ng ins
install
tallme
ment
nt sal
sale. Dur
During
ing 2016
2016,, Molin
olino
o sold
old furni
urnitture
ure to an
individual for P3,000 at a gross profit of P1,200. On June 1, 2016, this installment
account receivable had a balance of P2,200 and it was determined that no further  
collections would be made. Molino, therefore repossessed the merchandise. When
reacquired, the merchandise was appraised as being worth only P1,000. In order to
impr
improv
ovee its
its sala
salabi
bili
lity
ty,, Beng
Bengal
al incu
incurr
rred
ed cost
costss of P100
P100 for
for reco
recond
ndit
itio
ioni
ning
ng.. Norm
Normal
al prof
profit
it on
resale is P200. What should be the loss on repossession attributable to this merchandise?
A . P 220
B. P 620
C. P 320
D . P 880
(Dayag, 2015)
8. The
The Cindy
indy,, Inc.
nc. bega
began
n oper
operat
atin
ing
g at the
the begi
beginn
nnin
ing
g of the
the cal
calenda
endarr year
year 2016
2016 and,
and, usin
using
g the
installment method of accounting, presented the following data for the first year:
Installment sales P 400,000
Gross margin based on cost 66- ⅔%
Inventory, Dec. 31, 2016 80,000
General and administrative expenses 40,000
Accounts receivable, Dec. 31, 2016 320,000
The balance of the deferred gross profit account, end of 2016 should be:
A. P192
P192,0
,000
00
B. P128
P128,0
,000
00
C. P96,000
000
D. P80,
P80,00
0000
(Dayag, 2015)

9. Fryman Furniture uses the installment-sales method. No further collections could be

made on an account with a balance of P18,000. It was estimated that the repossessed
fur
furnitu
niture
re coul
could
d be sold
old as is for P5,4
P5,400
00,, or for P6,3
P6,300
00 if P300
P300 were
were spent
pent recon
econdi
diti
tion
oniing
it. The gross profit rate on the original sale was 40%. The loss on repossession was:
A. P4,500
B. P4,800
C. P12,000
000
D. P12,
P12,60
6000
(Dayag, 2015)

10.
10. EMC
EMC Motor
otorss, a deal
dealer
er of motor
otor vehi
vehicl
cle,
e, sales
ales excl
exclus
usiv
ivel
ely
y on ins
install
tallme
ment
nt basi
basis.
s. One
One of its
its
customers, Mr. Ambo purchased a motorcycle for P45,375. The cost to EMC was
P25,
P25,41
410.
0. Afte
Afterr maki
makingng an init
initia
iall paym
paymenentt of P6,0
P6,050
50,, Mr.
Mr. Am
Ambobo defa
defaul
ulte
ted
d on subs
subseq
eque
uentnt
 payments. EMC lost no time in repossessing the motor vehicle which, by this time, was
appr
apprai
aise
sed
d at a valu
valuee of P12,
P12,65
650.
0. EM
EMC C had
had to incu
incurr addi
additi
tion
onal
al cost
cost of repa
repair
irs/
s/re
remo
mode
dell
llin
ing
g
of P1,6
P1,650
50 bef
before
ore the motor
otor vehi
vehicl
clee was
was subs
ubseque
equent
ntly
ly resol
esold
d for
for P27,
P27,50
5000 to Mr. Joey
oey who
who
made an initial payment of P6,875.

How much profit was realized on the sale to Mr. Joey?

A. P3,025
B. P3,300
C. P3,575
D. P3,850
(Dayag, 2015)
11. The following information are obtained
obtained from the books of accounts of E Inc. on June 30,
20x5: deferred gross profit balance of P202,000
P202 ,000 and total collections on installment sales
of 440,000. Gross profit rate is cost plus 25%. E uses the installment method of
accounting. What is E’s total installment sales for 20x5?
A. 1,45
1,450,
0,00
000
0
B. 1,01
1,010,
0,00
000
0
C. 1,44
1,440,
0,00
000
0
D. 1,56
1,560,
0,00
000
0
(CPAR, 2017)

12.
12. Th
Thee B com
comput
puter stor
tore star
stared
ed its
its oper
operat
atio
ion
n in Janu
Januar
ary
y 1, 20x6
20x6.. Dur
During
ing the
the year
year,, it had
had cash
cash
sale
saless of P6,8
P6,875
75,0
,000
00 and
and ins
install
tallme
ment
nt sales
ales of P16,
P16,50
500,
0,00
000.
0. B impo
imposses a mark
ark up on cos
cost of 
25%
25% for cash sales and and 50% for installment sales. Duri uring 20x6
0x6 installment receiveivabl
able
 balance amounted to P6,600,000. How much is the realized gross profit for 20x6?
A. 2,20
2,200,
0,00
000
0
B. 3,57
3,575,
5,00
000
0
C. 3,30
3,300,
0,00
000
0
D. 4,67
4,675,
5,00
000
0
(CPAR, 2017)

13. On January 1, 1999, Tom Bravo sells 20 acres of farmland for P6,000,000 taking in
exc
exchang
ange a 10% intere
erest bearing note. Tom Bravo pur
purchas
hased the farmland in 198
1984 at a
cost of P5,000,000. The note will be paid in three installments of P2,412,690 each
Decem
cember 31,
31,1999,
99, 200
2000, and 200
2001. How much
uch must
ust be def
deferr
erred gross profit at the end
of 1999 under the installment method of revenue recognition?
A. 1,00
1,000,
0,00
000
0
B. 697,885
885
C. 637,462
462
D. 597,885
885
(CPAR, 2017)

14. Revenues and gains are generally

generally recognized
recognized when:
A. cash
cash has
has been
been recei
received
ved..
B. cash has been received
received and they
they have been earned
earned through substant
substantial
ial completion
completion..
C. they are realiz
realized
ed or realizable
realizable and
and a contract
contract has been signed.
signed.
D. they are realized
realized or realizabl
realizablee and have been earned through
through substant
substantial
ial
completion.
(CPAR, 2017)
15. In accounting for sales on consignment, sales revenue and the related cost of goods sold
should be recognized by the
A. consignor
consignor when
when the goods
goods are shipped
shipped to
to the consigne
consignee.
e.
B. consignor
consignor when
when the consignee
consignee has sold the
the goods.
goods.
C. consignee
consignee when the goods
goods are shipped
shipped to
to the third
third party.
party.
D. consignee
consignee when cash is received
received from the customer
customer..
(CPAR, 2017)

16. When using the installment

installment sales method,
A. gross profit is deferred until all cash is received, but revenues and costs are
recognized in proportion to the cash
ca sh collected from the sale.
B. gros
grosss prof
profit
it is recog
ecogni
nize
zed
d onl
only aft
after the
the amou
amountnt of cas
cash coll
collec
ectted exce
exceed
edss the cost
cost
of the item sold.
C. total revenues and costs are recognized at the point of sale, but gross profit is
deferred in proportion to the cash that is uncollected from the sale.
D. revenue, costs, and gross profit are recognized proportionally as the cash is
received from the sale of product.
(CPAR, 2017)

17. The cost recovery

recovery method
method is
A. used only when circumst
circumstances
ances surrounding
surrounding a sale are so uncertain
uncertain that earlier
earlier
recognition is impossible.
B. the most
most common method
method of accounti
accounting
ng for real
real estate
estate sales.
sales.
C. similar
similar to
to percentage-
percentage-of-co
of-completi
mpletion
on accounting.
accounting.
D. never acceptable
acceptable under
under generally
generally accepted
accepted accounting
accounting principles
principles..
(CPAR, 2017)

18. In this method, the probability

probability of recovering product or service costs is remote.
A. Cash
Cash meth
method
od
B. Inst
Instal
allm
lment
ent meth
method
od
C. Profit
Profit recover
recoveryy meth
method
od
D. Cost
Cost recov
recovery
ery method
method
(CPAR, 2017)

19. In this method, each

ach collect
ection on a contr
ntract is rega
egarded as representi
nting both a return of 
cos
cost and a reali
alization of gross
oss profit in the ratio in whic
hich these two fact
actors
ors are found
und in
the original sales price.
A. Cash
Cash meth
method
od
B. Inst
Instal
allm
lment
ent meth
method
od
 C. Profit
Profit recover
recovery
y meth
method
od
D. Cost
Cost recov
recovery
ery method
method
(CPAR, 2017)

20. May either be cashash sale

ales and
and credi
edit sales. The time of sale
ale (or the full
ull accru
crual method) of 
revenue recognition is applied to this particular type of sales.
A. Instal
Installme
lment nt sales
sales
B. Regu
Regulalarr sale
saless
C. Time
Time of sale
sale
D. Speci
Special
al sale
saless
(CPAR, 2017)

21. The installment method of recognizing profit

profit for accounting purposes is acceptable if
A. Collections
Collections in
in the year of sale do not exceed
exceed 30% of the total
total sales price
price
B. An unreali
unrealized
zed profit
profit account is credit
credited
ed
C. Collection
Collection of
of the sales
sales price
price is not reasonabl
reasonablyy assured
assured
D. The method
method is consistentl
consistentlyy used for all sales
sales of similar
similar merchandis
merchandisee
(Punzalan, 2016)

22. Under the cost recovery method of revenue recognition,

A. Income is recogniz
recognized
ed on a proportionate
proportionate basis
basis as cash is received
received on the sale
sale of
the product
B. Income is is recognized
recognized when
when the cash received
received from
from the sale
sale of the product
product is
is
greater than the cost of the product
produc t
C. Income
Income is recog
recogniz
nized
ed immedi
immediateately
ly
D. None
None of
of the
these
se
(Punzalan, 2016)

23. Which of the following are recognized each period under the cost recovery method?
A. Cost
Costss only
only
B. Reve
Revenunues
es onl
only
y
C. Both
Both costs
costs and revenue
revenuess
D. None
None ofof the
these
se
(Punzalan, 2016)
For Items #24-25, use the following information:
Presented below are the information taken from the books of Kooler Co.
2016 2017
Sales: Re
Regular P125,000 P187,500
Installment 62,500 100,000
COGS: Regular 75,000 112.500
Installment 31,250 45,000
Operating Expenses 25,000 31,250

Collections on accounts from:

Regular sales 100,000 137,500
Installment sales-2016 37,500 25,000
Installment sales-2017 62,500

24. The total realized gross profit

profit on installment sales
sales for 2017 is
A. P 46,8
46,875
75
B. P 9393,75
,750
C. P114
P114,3,375
75
D. P 87,5
87,500
00

25. Refer to No. 24, the

the net income for
for 2017 is
A. P 78,1
78,125
25
B. P 9393,75
,750
C. P 9898,75
,750
D. P 90,6
90,625
25
(PRIA Handout 2018)

(Items #26-28, confusing format, not sure if items are under 2016 or 2017)

For Items #26-28, use the following information:

The fo
The folllo
lowi
wing
ng sel
elec
ecte
ted
d ac
accocoun
untts ap
appe
pearared
ed in th
thee tr
tria
iall ba
bala
lanc
ncee of AbAben
enso
sonn Sa
Sale
less as of De
Dece
cemb
mber 
er 
31, 2016: Installment receivable-2016 P 15,000; Installment receivable-2017 P 200,000;
Begi
ginnni
nin ng inventnto
ory P 70,000 00;; Pur
urcchas
asees P 55
5555,000; Rep epoossessions P 3,000 00;; Regular sales P
385,000; Installment sales P425,000; Deferred gross profit-2016 P 54,000; Additional
info
inform
rmatatio
ion:
n: Ja
Janu
nuar
ary
y 1,
1,20
201717,, In
Inst
stal
allm
lmenentt re
rece
ceiv
ivab
able
le-2
-201
0166 P 12
120,
0,00
000;
0; En
Endi
ding
ng in
inve
vent
ntor
ory
y of ne
new
w
and
an d re
repo
posssses
esss me
merc
rcha
hand
ndis
isee P 95
95,0
,000
00;; Gr
Gros
osss pr
prof
ofit
it ra
rate
te on re
regu
gula
larr sa
sale
less 30
30%.
%. Re
Repoposs
sses
essi
sion
onss wa
wass
made dur uriing the ye
yeaar. It was a 2016 sale and the correspondi din
ng unc ncoollect
cteed ac
acccoun
untt at the time
of repossession was P 7,750.
 26. The gross profit realized
realized on collections for installment
installment sales in 2016 was
A. P 47
47,2
,250
50
B. P 50,7
50,737
37.5.50
0
C. P 43,7
43,762
62.5.50
0
D. P 7,75
750
0

27. Refer to No. 26, the gross profit realized on collections for installment sales in 2017 was
A. P 8787,0
,075
75
B. P 88,6
88,672
72.5
.50
0
C. P 8585,5
,50
00
D. P 263
263,5
,500
00

28. Refer to No. 26, The loss on repossession made on a 2016 sale
sale was
A. P 1,
1,26
262.
2.50
50
B. P 48
487.
7.550
C. P 1,
1,805
D. P 7,75
7500
(PRIA Handout 2018)

For Items #29-30, use the following information:

These data pertain to installment sales of Mickey’s Store:
■ Downpayment, 20%
■ Installment sales: P545,000 in Year 1; P785,000 in Year 2; and P968,000 in Year 3
■ Mark-up on cost, 35%
■ Collections after down payment: 40% in the year of sale, 35% in the year after sale, and
25% in the third year.

29. The realized

realized gross profit
profit in Year 1 is:
A. 109,
109,35
357
7
B. 73,474
C. 99,190
D. 114,
114,82
825
5

30. The unrealized gross profit for

for installment for installment sales made during
during Year 2,as of
the end of Year 2 is:
A. 97,689
B. 131,880
880
C. 141,112
112
D. 114,
114,06
063
3
 (Punzalan, 2016)

31.
31. Chr
Chris Co.
Co. sell
ells equi
equipm
pmenentt on ins
install
tallme
ment
nt cont
contrracts
acts.. Which
hich of the
the foll
ollowin
owingg stat
tatemen
ements
ts
 best justifies Chris’s use of the cost recovery method of revenue recognition to account
for these installment sales?
A. The sales contract
contract provide
providess that title
title to the equipment
equipment passes
passes to the buyer only
only
when all payments have been made.
B. No cash payments
payments are due
due until one year from the the date of
of sale.
sale.
C. Sales are subject
subject to a high
high rate
rate of return
return..
D. There is no reasonabl
reasonablee basis for estimat
estimating
ing collectabil
collectability
ity
(Punzalan, 2018)

32. Winne
nner Co. is engageaged in ext
extens
ensive expl
xplora
oration for water in Utah. if, upon dis
discovery
ery of 
wate
water,
r, Winne
innerr does
does not
not recog
ecogni
nize
ze any
any reven
evenue
ue from
rom wat
water sal
sales unt
until the
the sales
ales exce
exceed
ed the
the
costs of exploration, the basis of revenue recognition being employed is the
A. Produ
Product
ctio
ion
n basis
basis
B. Cash
Cash (or collec
collectio
tion)
n) basis
basis
C. Sales
Sales (or accrua
accrual)
l) basis
basis
D. Cost
Cost recov
recovery
ery basis
basis
(Punzalan, 2018)

33.
33. Leop
Leoparard
d Co.
Co. uses
uses the ins
install
tallme
mentnt sales
ales meth
method
od to recog
ecogni
nize
ze reven
evenue
ue.. Cus
Custome
tomerrs pay
pay the
inst
instal
allm
lmen
entt note
notess in 24 equa
equall mo
mont
nthl
hly
y amou
amountntss, whi
which incl
includ
udee 12%
12% int
interes
erestt. What
What is the
the
 balance of an installment note receivable 6 months after the sale?
A. 75% of the the origin
original
al sales
sales price.
price.
B. Less than 75% 75% of the original
original sales price.
price.
C. The present
present value
value of the remaining
remaining monthl
monthly y payments
payments discounted
discounted at 12%.
12%.
D. Less than
than the present
present value of remaining
remaining monthly
monthly payments
payments discounted
discounted at 12%.
12%.
(Punzalan, 2018)

34. The method most commonly used to report

report defaults and repossessions is
A. Provide
Provide no basis for the
the repossessed
repossessed asset
asset thereby
thereby recognizing
recognizing a loss.
loss.
B. Record the repossessed merchandise at fair value, recording a gain or loss if 
appropriate.
C. Record the
the repossessed
repossessed merchandis
merchandisee at book value, recordin
recording
g no gain or loss.
D. None
None of thes
these.
e.
(Punzalan, 2018)
35. According to IAS 18, Revenue, which two of the following criteria must be satisfied
 before revenue from the sale of goods should be recognized in profit or loss?
1. Revenue
Revenue can be meas
measure
ured
d relia
reliably
bly..
2. Managerial
Managerial control
control over the
the goods sold hashas been
been relinquish
relinquished.
ed.
3. Owners
Ownership
hip has
has been tran
transfe
sferre
rred
d to the buyer
buyer..
4. The outco
outcome
me of the
the trans
transact
action
ion is
is certai
certain.
n.

A. 1 and 2
B. 1 and 3
C. 1 and 4
D. 3 and 4
(Punzalan, 2018)

36.
36. On Janu
Januar
ary
y 2, 2016
2016,, Col
Colt Co.
Co. sold
old land
land that
hat cos
cost P600
P600,0
,000
00 for P800
P800,0,000
00,, recei
eceivi
ving
ng a note
note
 bearing interest at 10%. The note will be paid in three annual installments of P321,700
star
starti
ting
ng on Dece
Decembmber
er 31,
31, 2016
2016.. Beca
Becaus
usee coll
collec
ecti
tion
on of the
the note
note is very
very unce
uncert
rtai
ain,
n, Colt
Colt will
will
use
use the cos
cost recov
ecover
ery
y metho
ethod.
d. How
How mumuchch reven
evenueue from
rom this
his sale
ale shou
should
ld Colt
Colt reco
recogn
gniz
izee in
2016?
A. 0
B. 6,000
C. 8,000
D. 20,000
(Punzalan, 2018)

37. On December 31, 2016, Mill Co. sold construction equipment to Drew, Inc. for  
P1,8
P1,800
00,0,000
00.. Th
Thee equi
equipmpmen
entt had
had a carr
carryi
ying
ng amou
amountnt of P1,2
P1,200
00,0
,000
00.. Drew
Drew pai
paid P300
P300,0 ,000
00
cash on December 31, 2016 and signed a P1,500,000 note bearing interest at 10%,
 payable in five annual installments of P300,000. Mill appropriately accounts for the sale
unde
underr the
the inst
instal
allm
lmen
entt meth
method
od.. On Dece
Decemb
mber
er 31,
31, 2017
2017,, Drew
Drew paid
paid P300
P300,0
,000
00 prin
princi
cipa
pall and
and
P150
P150,0
,000
00 inter
nteres
est.
t. For
For the
the year
year ende
ended
d Dece
Decemb
mber
er 31,
31, 2017
2017,, what
what total
otal amou
amount
nt of reven
evenueue
should Mill recognize from the construction equipment sale and financing?
A. 250,
250,00
000
0
B. 150,000 000
C. 120,000 000
D. 100,
100,00
000
0
(Punzalan, 2018)

38. On January 1, 2016, Rex Co. sold a used machine to Lake, Inc. for P525,000. On this
date
date,, the
the mach
machin
inee had
had a depr
deprec
ecia
iate
ted
d cost
cost of P367
P367,5
,500
00.. Lake
Lake paid
paid P75,
P75,00
000
0 cash
cash on Janu
Januar
ary
y
 1, 2016 and signed a P450,000 note bearing interest at 10%. The note was payable in
three ann
annual installmentsnts of P150,00,000 beginning Januar uary 1, 2017. Rex appappropriately
acco
accoununtted for
for the
the sale
ale unde
underr the
the inst
nstallm
allmen
entt metho
ethod.
d. Lake
Lake made
made a time
timely
ly paym
paymen
entt of firs
firstt
inst
instal
allm
lmen
entt on Janu
Januar
ary
y 1, 2017
2017 of P195
P195,0,000
00,, whic
which
h incl
includ
uded
ed inte
intere
rest
st of P45,
P45,00
000
0 to date
date of 
 payment. At December 31, 2017, Rex had a deferred gross profit of
A. 105,
105,00
0000
B. 99,000
C. 90,000
D. 76,500
(Punzalan, 2018)

39. The books of Harry

Harry Co. show the
the following balances on December 31, 2016:

Accounts Receivable P313,750

Deferred Gross Profit (before adjustment) 38,000

Analysis of the accounts receivable reveal the following:

Regular accounts P207,500

2015 installment accounts 16,250
2016 installment accounts 90,000

Sales on an installment basis in 2015 were made at 30% above cost; in 2016, at 33 ⅓
abov
abovee cos
cost. Ex
Expe
pens
nses
es paid
paid was
was P1,5
P1,500
00 relat
elatiing to ins
install
tallme
ment
nt sales
ales,, how
how mu
much
ch is the net
net
income on installment sales?
A. P11,
P11,00
000
0
B. 11,500
C. P16,000
000
D. 10,250
(Dayag, 2015)

40. On September 30, 2015, Barry bought a car for P3,600,000. A downpayment of  
P1,600,000 was made with the balance due in 10 monthly installments, the first to be
made
made at the
the end
end of oct
october
ober.. Bar
Barry is to make
make mont
onthly
hly paym
paymenentts of P200
P200,0
,000
00 plus
plus inter
nteres
estt
on the unpaid balance at 12%. What is the total collection on January 31, 2016?
A. P200
P200,0
,000
00
B. 214,000
000
C. P216
P216,0
,000
00
D. 218,
218,00
0000
 (Dayag, 2015)
41. Under the installment
installment sales
sales method,
A. revenue,
revenue, costs, and gross
gross profit are recognized
recognized proporti
proportionate
onate to the cash that is
received from the sale of the product.
B. gross profit
profit is deferred
deferred proportion
proportionate
ate to cash uncollected
uncollected from sale
sale of the product,
 but total revenues and costs are recognized at the point of sale.
C. gross profit
profit is not recogni
recognized
zed until the
the amount of cash received
received exceeds
exceeds the cost
of the item sold.
D. revenues
revenues and costs are recognized
recognized proportion
proportionate
ate to the cash received
received from the sale
of the product, but gross profit is deferred until all cash is received.
(K, W & W)

42.
42. Slic
Slick'
k'ss Us
Used
ed Car
Cars sel
sells pre-
pre-ow
owne
nedd cars
cars on the inst
nstallm
allmen
entt bas
basis and
and car
carries
ies its
its own
own not
notes
 because its customers typically cannot qualify for a bank loan. Default rates tend to be
high or unpredictable. However, in the event of nonpayment, Slick's can usually
repossess the cars without loss. The revenue method Slick would use is the:
A. Instal
Installme
lment
nt sales
sales meth
method.
od.
B. Cost
Cost recover
recovery y method.
method.
C. Point
Point of sales
sales method.
method.
D. Comple
Completed
ted contr
contract
act metho
method.
d.
(S, S & T)

43. When assets that sold and accounted for by the installment method are subsequently
repossessed and returned to inventory, they should be recorded on the books at
A. Sell
Sellin
ingg pri
price
ce..
B. The amount of the installmen
installmentt receivable
receivable less associated
associated deferred
deferred gross
gross profit.
profit.
C. Net realiz
realizabl
ablee value.
value.
D. Net realiza
realizable
ble value
value minus
minus normal
normal profit.
profit.
(Gleim)

44. Pie Co. uses the installment sales method to recognize revenue. Customers pay the
inst
instal
allm
lmen
entt note
notess in 24 equa
equall mo
montnthl
hly
y amou
amount
ntss, whi
which incl
nclude
ude 12%
12% inte
interrest.
est. What
What is an
installment notes receivable balance six months after the sale?
A. 75% of thethe origin
original
al sales
sales price.
price.
B. Less than 75%75% of the original
original sales price.
price.
C. The present
present value
value of the remaining
remaining monthl
monthly y payments
payments discounted
discounted at 12%.
12%.
D. Less than
than the present
present value of the remaining
remaining monthly
monthly payments
payments discounted
discounted at 12%
(AICPA 1192T-9)
 45.
45. Gent
Gentry
ry Co.
Co. uses
uses the
the ins
install
tallme
ment
nt sales
ales meth
method
od.. When
When an accoaccoun
untt had
had a bal
balance
ance of P3,5
P3,500
00,,
no furt
urther collect
ections could
uld be made and the dining room set was repo epossessed. At that
tim
time, it was est
estimat
imateded that
that the dini
dining
ng room
room set coul
could d be sold
sold for P1,0
P1,00000 as repo
reposs
sses
esssed,
ed, or 
for
for P1,3
P1,300
00 if the com
company
pany spent
pent P125
P125 recon
econdi
ditition
oniing it.
it. Th
Thee gros
grosss prof
profiit rate
ate on this
this sale
ale
was 70%. What is the gain or loss on repossession?
A. 2,45
2,4500 los
losss
B. 2,50
2,5000 los
losss
C. 300 gagain
D. 125
125 gai
gain
(Punzalan, 2018)

For Items #46-47, use the following information:

Baker Co. is a real estate developer that began operations on January 2, 2016. Baker  
appr
approp
opri
riat
atel
ely
y uses
uses the
the inst
instal
allm
lmen
entt meth
method
od of reve
revenu
nuee reco
recogn
gnit
itio
ion.
n. Bake
Baker’
r’ss sale
saless are
are made
made on the
the
 basis of a 10% Down Payment, with the balance payable over 30 years. Baker’s gross profit
 percentage is 40%. Relevant information for baker’s first two years of operations
operations is as follows:
Sales 2017 - P16,000,000
Sales 2016 - P14,000,000
Cash Collections 2017 - P2,020,000
Cash Collections 2016 - P1,400,000

46. At Dec. 31, 2016, Baker’s deferred gross

gross profit was
A. 5,04
5,040,
0,00
000
0
B. 5,60
5,600,
0,00
000
0
C. 8,40
8,400,
0,00
000
0
D. 12,6
12,600
00,0
,000
00
47. Baker’s realized Gross Profit for 2017 was
was
A. 6,40
6,400,
0,00
000
0
B. 2,02
2,020,
0,00
000
0
C. 1,21
1,212,
2,00
000
0
D. 808,
808,00
0000
(Punzalan, 2018)

For Items #48-50, use the following information:

QR Appl
pplianc
iances
es sells
ells home
home thea
theate
terr set
set both
both on ins
install
tallme
ment
nt and
and cash
cash basi
basiss. Mr.
Mr. X pur
purchas
chased
ed a set
set
from QR Appliances on March 30, 2015 015 for P36
P367,500
500 which has
has a cos
cost of P289,80
,800. A use
used set
is accept
epted as down paymayment, P89,
89,600 being
eing all
allowed on the trade in. The used set can be resold
for P11
P112,140
140 after recondi
nditioning cost
ost of P5,362.
62. The company expec pects to make a 20% Gross
Profit on the sale of the of used set. The balance of the sale is to be paid on a 10 month
inst
instal
allm
lmen
entt basi
basiss star
starti
ting
ng May
May 1, 2015
2015.. Mr.
Mr. X defa
defaul
ulte
ted
d paym
paymen
entt star
starti
ting
ng Nove
Novemb
mberer 1, 2015
2015 and
and
the
the set
set was
was imme
immedi diat
atel
ely
y repos
eposssess
essed.
ed. Th
Thee repo
reposssess
essed merch
erchan
andi
disse was
was appr
apprai
aise
sed
d at a valu
valuee of 
P65,625 at the time of repossession. QR had to incur additional cost of repairs amounting to
P6,475 before the car was subsequently resold on December 1, 2015 for P90,125 cash to Mr. Y.

48. What is the adjusted installment sales

sales price?
A. 84,350
B. 362,250250
C. 367,500500
D. 390,
390,04
040
0

49. How much is the realized gross

gross profit on the sale
sale to Mr. X?
A. 68,243
B. 45,470
C. 52,363
D. 50,218

50. Compute for the net income to be recognized for the year 2015
A. 69,293
B. 44,940
C. 51,415
D. 68,243
(CPAR 0310)

51. Asser Computer Co. bega egan operations at the begi

eginni
nning of 2016. Duri
uring the year
ear, it had
cash sales of P6,875,000 and sales on installment basis of P16,500,000. Asser adds a
markup on cost of 25% on cash sales and 50% on installment sales. Installment
receivable at the end of 2016 is P6,600,000. Total realized gross profit for 2016 is:
A. P1,3
P1,375
75,0,000
00
B. P3,3
P3,300
00,0,000
00
C. P4,6
P4,675
75,0,000
00
D. P3,5
P3,575
75,0,000
00
(Dayag, 2015)

52.
52. The Cent
Centra
rall Plai
Plains
ns Subdi
Subdivi
visi
sion
on sell
sellss resi
residen
denti
tial
al subd
subdiv
ivis
isio
ion
n lots
lots on inst
instal
allm
lmen
entt basi
basis.
s. Th
Thee
following information was taken from the company’s records as at December 31, 2016:

Installment Accounts Receivable

January 1, 2016 P 75 5 ,00 0
 December 31, 2016 8 4 0 ,0 0 0
Unrealized Gross Profit, January 1, 2016 33 9 ,7 50
Installment Sales 9 5 0 ,0 0 0

How much is the balance of Unrealized Gross Profit as at December 31, 2016?
A. P378
P378,0
,000
00
B. P339
P339,7
,750
50
C. P427
P427,5
,500
00
D. P389
P389,2
,250
50
(Dayag, 2015)

53. Gema Inc. began

gan oper
perati
ations on January
ary 1, 2016 and appropropriate
ately use
uses the installment
method of accounting. The following data are available for 2016:

Inst
nstallm
allmen
entt Acc
Accou
ount
ntss Rec
Recei
eiva
vabl
ble,
e, 12/3
12/31/
1/20
2016
16 P600
P600,0
,000
00
Installment sales for 2016 1,050,000
Gross profit on sales 40 %

Under the installment method, Gema’s deferred gross profit at December 31, 2016 is:
A. P360
P360,0
,000
00
B. P270
P270,0
,000
00
C. P240
P240,0
,000
00
D. P180
P180,0
,000
00
(Dayag, 2015)

54.
54. Jane
Jane En
Ente
terp
rprrises
ises uses
uses the ins
install
tallme
ment
nt met
method
hod of acco
accoun
unti
ting
ng and
and it has
has the
the follo
ollowi
wing
ng data
data
at year-end:

Gross Margin on cost 66 2/3%

Unrealized Gross Profit P 19 2 ,00 0
Cash collections including down payments 360 ,000

What was the total amount of sales on installment basis?

A. P480
P480,0
,000
00
B. P552
P552,0
,000
00
C. P648
P648,0
,000
00
D. P840
P840,0
,000
00
(Dayag, 2015)
55.
55. Spi
Spicer
cer Co.
Co. has
has a nor
normal
mal gros
grosss prof
profit
it on insta
nstalllmen
lmentt sales
ales of 30%.
30%. A 2014
2014 sales
ales resul
esultted in
a default ear
early in 201
2015. At the date ate of def
defaul
ault, the bal
balanc
ance of the installment receiceivab
vable
was
was P24,
P24,00
000,
0, and
and the
the repo
reposssses
esse
sed
d merc
merchahand
ndis
isee had
had a fair
fair valu
valuee of P13,
P13,50
500.
0. As
Assu
sumi
ming
ng the
the
repo
reposssess
essed merch
erchan
andidisse is to be reco
record
rded
ed at fair
air valu
value,
e, the
the gain
gain or los
loss on repo
reposs
sses
esssion
ion
should be:
A. P0
B. P3,3
P3,300
00 gain
gain
C. A P3,
P3,30
3000 los
losss
D. A P7,5
P7,500
00 los
losss
(Dayag, 2015)

56. Coas
oaster manufa
ufactu
ctures and sells loggin
ging equ
equipment. Due to the nature of its bus business,
Coas
oaster is unabl
able to reliably predic
dict bad debtebts. Duri
uring 2015, Coas
oaster sold equ
equipment
cost
costin
ing
g P2,4
P2,400
00,0
,000
00 for
for P3,6
P3,600
00,0
,000
00.. Th
Thee term
termss of the
the sale
sale were
were 20%,
20%, with
with equa
equall paym
paymen
ents
ts
due quarterly over the next 3 years. All payments for 2015 were made on schedule.
Round answers to two places.

Assumi
Assu ming
ng that
that Coas
Coaste
terr uses
uses the
the inst
instal
allm
lmen
entt meth
method
od of accou
account
ntin
ingg for
for its
its inst
instal
allm
lmen
entt sale
sales,
s,
what amou
amounnt of reali
alized gross
oss profit will Coaster repor
port in its income statement for the
year ended December 31, 2015?
A. P1,6
P1,680
80,0
,000
00
B. P1,1
P1,120
20,0
,000
00
C. P560
P560,0
,000
00
D. P369
P369,6
,600
00
(Dayag, 2015)

57. Assuming the same information in the previous number, and that Coaster uses the
cos
cost-recover
very method of accoun
ounting for its installment sale
ales, what
hat amount of real
ealized
gross profit will Coaster report in its income statement for year ended December 31,
2016?
A. P0
B. P240
P240,0
,000
00
C. P316
P316,8
,800
00
D. P960
P960,0
,000
00
(Dayag, 2015)

58. On January 15, 2015, AA Co. enters into a contract to build custom equipment of BB
Co..
Co.. Th
Thee cont
contrract
act speci
peciffied
ied a deli
delive
verry date
date of Marc
March
h 1. Th
Thee equi
equipm
pmen
entt was not
not del
deliver
ivered
ed
 unt
until Marc
arch 31. The contr ntract requ
equired full payment of P150,
50,000 30 day
days after deliver
very.
This contract should be recorded on
A. Janua
Januaryry 1, 201
20155
B. Marc
March h 1,
1, 201
2015
5
C. Marc
March h 31,
31, 201
20155
D. Apri
Aprill 30, 201
2015
5
(Dayag, 2015)

59.
59. CC Com
ompu putters
ers manu
manuffact
actures
ures and
and sell
ells page
pagers
rs and
and radi
radio
o pagi
paging
ng syst
ystems
ems whi
which incl
includ
udee a
180
180 day
day warr
warranantty on prod
produc
uctt defe
defect
ctss. It also
also sell
ells an exte
extend
nded
ed war
warranty
anty whic
whichh prov
provid
ides
es
an addi
addittiona
ionall two year
yearss of prot
protec
ecti
tion
on.. On MayMay 10,
10, it sol
sold a pagi
paging
ng syst
ystem for P4,6
P4,62020 and
and
an extended warr arrant
anty for anot
nother
her P1,44,440. The journal ent entry to recor
cord this transact
action
would include
A. A credit
credit to service
service revenue of P6,060
P6,060
B. A credit
credit to serv
service
ice revenu
revenuee of P1,440
P1,440
C. A credit
credit to sales
sales of P4,620 and
and a credit to to service
service revenue ofof P1,440
D. A credit
credit to unearned
unearned service
service revenue
revenue of of P1,440
P1,440
(Dayag, 2015)

60. On July 31, EE Co. contracted to have two products built by FF Co. for a total of  
P222
P222,0
,000
00.. Th
Thee cont
contra
ract
ct speci
peciffies
ies that
that paym
paymen
entt will
will only
only occu
occurr afte
afterr both
both prod
produc
ucts
ts have
have
 been transferred to EE Co. EE determines that the standalone prices are P120,000 for 
Product 1 and P102,000 for Product 2. On August 1, when Product 1 has been
transferred, the journal entry to record this event include a
A. Debit to Accounts
Accounts receivable
receivable for
for P120,000
P120,000
B. Debit to Accounts
Accounts receivable
receivable for
for P102,000
P102,000
C. Debit to Contrac
Contractt Assets
Assets for P102,000
P102,000
D. Debit to Contract
Contract Assets
Assets for
for P120,000
P120,000
(Dayag, 2015)

61. A type of sale which provides for a series of payments over a period of time.
time.
A. Cred
Credit
it sale
sale
B. Auct
Auctio
ionn sal
salee
C. Inst
Instal
allm
lment
ent sale
sale
D. Bart
Barter
er sal
salee
(Guerrero, 2013)
62. In installment
installment sale, revenue is recognized:
A. At the point
point of sale.
sale.
B. After
After the point
point of sale
sale..
C. Before
Before the point
point of sale
sale..
D. All
All of the
the above
above..
(Guerrero, 2013)

63. Under the cost recovery method, revenue is recognized until:

A. Collections
Collections are
are equal to
to the amount
amount of cost of
of goods sold.
sold.
B. Collections
Collections are more
more than thethe cost of
of goods sold.
C. Collections
Collections are less
less than
than the cost
cost of goods
goods sold.
sold.
D. The selli
selling
ng price
price is collec
collected
ted..
(Guerrero, 2013)

64. Incom
omee recog
cognized using the instnstallment meth
ethod of accou
counting generally equa
quals cash
collected multiplied by the
A. net operating
operating profit
profit percentage.
percentage.
B. net operating
operating profit
profit percentage
percentage adjusted
adjusted for expected uncollecti
uncollectible
ble accounts.
accounts.
C. gross
gross profit
profit percent
percentage.
age.
D. gross profit
profit percentage
percentage adjusted
adjusted for expected
expected uncollectibl
uncollectiblee accounts.
(AICPA)

65. Under
der this method, cascash coll
ollection is regarded as a part
artial recov
covery of cost and a part
artial
realization of profit.
A. Cost
Cost recov
recovery
ery method
method
B. Gross
Gross profit
profit real
realiza
izatio
tion
n method
method
C. Inst
Instal
allm
lment
ent meth
method od
D. None
None of the
the abov
abovee
(Guerrero, 2013)

66. Vic Corporation, which began business on January 1, 2015, appropriately uses the
installment sales method of accounting. The following data
d ata are available:
12/3
12/31/
1/20
2015
15 12/3
12/31/
1/20
2016
16
Balance of deferred gross profit on sales account:
accoun t:
2 01 5 P300,000
P3 P 1 20 ,000
2016 440,000
Gross profit rate on sales 30% 40%
 The installment accounts receivable balance at December 31, 2016 is
A. P1,0
P1,000
00,0
,000
00
B. 1,10
1,100,
0,00
0000
C. 1,40
1,400,
0,00
0000
D. 1,50
1,500,
0,00
0000
(Dayag, 2015)

For Items #67-68, use the following information:

Dudo
Dudongng Elec
Electr
tron
oniics makes
akes all
all of its
its sales
ales on cred
credit
it and
and acco
accoun
untts for them
them usin
using
g the
the inst
nstallm
allmen
entt
sales meth
ethod.
od. For simplicity, assume that all sales occ
occur on the first day of the yea
year and that all
all
cash
ash col
collections are made on the last day of the yeayear. Dudon
dong Elect
ectronics char
harges
ges 18% interest
on the unpaid installment balance Data for 2015 and 2016 are as follows:
2015 2016
Sale
Saless P100
P100,0
,000
00 P120
P120,0
,000
00
Cost of goods sold 60 ,000 80,000
Cash collections (principal and interest)
2015 sales 40 ,000 50,000
2016 sales 90,000

67. The interest

interest income recognized
recognized in 2016 amounted to:
A. P14,
P14,04040
0
B. 21,600
C. 35,640
D. 49,700

68. Compute the realized

realized gross profit in 2016:
A. P14,
P14,38
3844
B. 22,800
C. 37,184
D. 39,600
(Dayag, 2015)

69. Carlos Labung Appliance Co. sold a stove, costing P1,000 for P1,600 on September 
2012. The downpayment was P160, and the same amount was to be paid at the end of 
eac
each succee
ceeding month. Interest was charged on the unpai
paid balan
alancce of the contr
ntract at ½
of 1% a mont
onth, paym
ymen
entts being consider
dered as applying first to accr
ccrued
ued inte
nterest and the
 balance to principal.
 After paying a total of P640, the customer defaulted. The stove was repossessed in
Feb
Februar
uary 2013
013. It was estimated that the stove had
had a value of P56
P560 on a dep
depreci
eciated cost
 basis.

The realized gross profit and the gain(loss) on repossession on December 31, 2013 are:
A. P232.76
P232.76 and (P52.0
(P52.07)
7)
B. P240
P240 and
and (P5
(P52.0
2.07)
7)
C. P232.
P232.76
76 and (P40
(P40))
D. P240
P240 and
and (P40
(P40))
(Guerrero, 2013)

70. The Bengal Furniture Company appropriately used the installment sales method in
acco
accoun
untting
ing for the follo
ollowi
wing
ng ins
install
tallme
ment
nt sal
sale. Dur
During
ing 2013
2013 Beng
Bengal
al sol
sold furni
urnitture
ure to an
individual for P3,000 at a gross profit of P1,200. On June 1, 2013, this installment
account receivable had a balance of P2,200 and it was determined that no further  
collections would be made. Bengal therefore repossessed the merchandise. When
reacquired, the merchandise was appraised as being worth only P1,000. In order to
impr
improv
ovee its
its sala
salabi
bili
lity
ty,, Beng
Bengal
al incu
incurr
rred
ed cost
costss of P100
P100 for
for reco
recond
ndit
itio
ioni
ning
ng.. What
What shou
should
ld be
the loss on repossessions attributable to this merchandise?

A. P 22 0
B. P 3 20
C. P 8 80
D. P1,100
(Guerrero, 2013)

(Items 71-73, not aligned with the topic assigned)

71. Which of the following is least likely an acceptable method of measuring progress in
accordance with PFRS 15?
A. Relat
Relationshi
ionshipp between costs
costs incurred
incurred to date and total
total expected
expected costs.
B. Sur
Survey
veyss of wor
workk perfor
performed.
med.
C. Indepe
Independent
ndent appraisal
appraisal of value
value of work performe
performedd in relation
relation to the contract
contract price.
price.
D. The amount of progress
progress billin
billings
gs in relation
relation to the total
total contract
contract price.
(Millan, 2016)

72. At contract inception, PFRS 15 requires an entity to determine how the performance
obllig
ob igat
atio
ions
ns ide
dent
ntif
ifie
ied
d in the co
cont
ntra
ract
ct wil
illl be sat
atis
isfi
fied
ed.. Ac
Acco
corrdi
ding
ng to PF
PFRS
RS 15
15,, ho
how
w do
does
es
an entity satisfy a performance obligation in a long-term construction contrac?
 A. Over tim
Over imee
B. At a poin
pointt in
in tim
timee
C. Dism
Di smis
issa
sall ti
time
me
D. Eith
Either
er A oror B
(Millan, 2016)

73. Acco
corrdi
dinng to PFRS 15 Reven enuue from Contractctss with Customer erss, how should an ent ntiity
account for revenue form long-term construction contracts?
A. An en enti
titty rec
ecog
ogni
nize
zess rev
even
enue
ue fr
from
om lon
ong-
g-te
term
rm co
cons
nstr
truc
ucttio
ionn co
cont
ntrrac
acts
ts by us
usin
ingg th
thee
 percentage of completion method.
B. An entity recognizes revenue from long-term construction contracts by using
zero-profit method.
C. A or B
D. An en enttit
ity
y rec
ecog
ogni
nize
zess re
reve
venu
nuee fr
from
om lo
long
ng--te
terrm co
cons
nstr
truc
ucttio
ion
n co
cont
ntrrac
actts ei
eitthe
herr ov
over 
er 
time or at a point in time depending on how the performance obligation is
satisfied.
(Millan, 2016)

74. Under the installment sales method, realized gross profit is computed as
A. Sale price less Cost of goods
goods sold
sold
B. Gross profit
profit rate
rate divided
divided by Collection
Collection on
on sale
C. Gross profit
profit rate multiplied
multiplied by
by Collection
Collection on
on sale
D. Excess of collection
collection over Cost
Cost of goods
goods sold
sold
(Millan, 2016)

75.
75. Unde
Underr the
the insta
nstalllmen
lmentt sales
ales meth
method
od,, when
hen merc
mercha
hand
ndiise prev
previo
ious
uslly sold
old is repo
reposssess
essed,
ed,
the repossessed merchandise is recorded at
A. Fair
Fair valu
valuee
B. Orig
Origin
inal
al cos
costt
C. Curr
Curren
entt cos
costt
D. Any
Any ofof the
these
se
(Millan, 2016)

76. MM Company began operations on January 1, 2011 and appropriately uses the
installment method of accounting. The following data are available for 2011 and 2012
 2011 2012
Installment sales P1,200,000 P1,500,000
Cash collections from:
2011 sales 400,000 500,000
2012 sales 600,000
Gross profit on sales 30% 40%

The realized gross profit for 2012 is

A. P240
P240,0,000
00
B. 390,000
000
C. 440,000
000
D. 600,
600,00
0000
(Dayag, 2013)

77. TT Company, which began business on January 1, 2011, appropriately uses the
installment sales method of accounting. The following data
d ata are available for 2011:

Installment accounts receivable, 12/31/11 P200,000

Deferred gross profit, 12/31/11
140,000
(before recognition of realized gross profit)
Gross profit on sales 40%

The cas
The cash col
collect
lectio
ions
ns and
and the
the real
ealized
ized gros
grosss prof
profit
it on insta
nstall
llme
ment
nt sales
ales for
for the year
year ende
ended
d
December 31, 2011 should be
Cash Collections Realized Gross Profit
A. P100,000 P80,000
B. 100,000 60,000
C. 150,000 80,000
D. 150,000 60,000
(Dayag, 2013)
 78. Lane Company, which began operations on January 1, 2011, appropriately uses the
installment method of accounting. The following information pertains to Lane’s
operations for the year 2011:

Installment sales P1,000,000

Regular sales 600,000
Cost of installment sales 500,000
Cost of regular sales 300,000
General and administrative expenses 100,000
Collections on installment sales 200,000

The deferred gross profit account in Lane’s December 31, 2011 balance sheet should be:
A. P150
P150,0,000
00
B. 320,000
000
C. 400,000
000
D. 500,
500,00
0000
(Dayag, 2013)
(Items 79-80, not aligned with the topic assigned)

79. Mediocrcree Inc. has entered into a ver ery

y pr
proofitable fixe
xedd price con onttract for coconnstruc
uctting a
high
high-r
-ris
isee bu
buil
ildi
ding
ng ov
over
er a pe
peri
riod
od of th
thre
reee ye
year
ars.
s. It in
incu
curs
rs th
thee fo
foll
llow
owining
g co
cost
stss re
rela
lati
ting
ng to th
thee
contract during the first year:
■ Cost of material = P2.5 million
■ Site labor cost = P2.0 million
■ Agre
Ag reed
ed ad
admi
mini
nist
stra
rati
tive
ve co
cost
stss as pe
perr co
cont
ntra
ract
ct to be re
reim
imbu
bursrsed
ed by th
thee cu
cust
stom
omerer = P1
million.
■ Depreciation of the plant used for the construction = P0.5 million
■ Marketing costs for selling apartments, when they are ready = P1.0 million
■ Total estimated cost of the project = P18 million.
The percentage of completion of this contract at the year-end is:
A . 33 ⅓ %
B. 27%
C. 25%
D . 39%
(Dayag, 2013)

80.. Da
80 Dant
ntee Co
Cons
nstr
truc
ucti
tion
on CoComp
mpan
any
y us
uses
es th
thee pe
perc
rcen
enta
tage
ge of co
comp
mple
leti
tion
on me
meth
thod
od of ac
acco
coun
unti
ting
ng..
During 2011, Dant ntee contacted to bu
buiild an apa
parrtment house for Rizza for P10
10,,000,
0,0
0 00 .
 Dante estimated that total costs would amount to P8,000,000 over the period of  
const
constru
ruct
ctio
ion.
n. In co
conn
nnect
ectio
ion
n wi
with
th th
this
is con
contr
tract
act,, Dan
Dante
te in
incur
curre
red
d P1,
P1,00
000,0
0,000
00 of con
const
stru
ruct
ctio
ion
n
cost
costss du
duri
ring
ng 20
2011
11.. Da
Dant
ntee bi
bill
lled
ed an
and
d co
coll
llec
ecte
ted
d P1P1,5
,500
00,0
,000
00 fr
from
om Ri
Rizz
zzaa in 20
2011
11.. Ho
How
w mu
much
ch
gross profit should Dante recognize in 2011?
A. P3P30000,0
,000
00
B. 250,00 0000
C. 187,50 5000
D. 12125,5,00
0000
(Dayag, 2013
(CHUA, CATALINA FAYE DILODILO 81-90)

(Items 91-97, not aligned with the topic assigned)

91. Statement 1: “Step 2” of the recognition principles of PFRS 15 is the allocation of the
transaction price to the performance obligations in the contract.

Statem
Statemen
entt 2: PF
PFRSRS 15 re
requ
quirires
es th
that
at re
reve
venu
nuee fr
from
om al
alll lo
long
ng-t
-ter
erm
m co
cons
nstr
truc
ucti
tion
on co
cont
ntra
ract
ctss be
recognized using the percentage of completion method
A. Onl
Only y state
statemen
mentt 1 is
is true
true
B. Onl
Only y state
statemen
mentt 2 is tru
truee
C. Bo
Both th are
are fal
false
se
D. Bo
Both th are
are tru
truee
(Milan, 2016)

92.. St
92 Stat
atem
emen
entt 1: Ac
Acco
corrdi
ding
ng to PF
PFRS
RS 15
15,, a mea
eassur
uree of pr
prog
ogre
resss ba
base
sed
d on the ho
hour
urss ex
expe
pend
nded
ed
on the contract is an application of the inputs method.

Statem
Statemen
entt 2: Ac
Acco
corrdi
ding
ng to PF
PFRSRS 15 Re
Reve
venu
nuee fr
from
om Co
Cont
ntra
ract
ctss wi
with
th Cu
Cussto
tome
mers
rs co
cont
ntrrac
actts
are generally combined and accounted for as a single contract.
A. Onl
Only y state
statemen
mentt 1 is
is true
true
B. Onl
Only y state
statemen
mentt 2 is tru
truee
C. Bo
Bothth are
are fal
false
se
D. Bo
Bothth are
are tru
truee
(Milan, 2016)

93. Which of the following may affect the revenue recognized on a construction contract?
A. Co
Cont
ntra
ract
ct pr
pric
icee
B. Ch
Chan
ange
ge ord
order
erss
C. Es
Escal
calat
atio
ionn clause
clausess
 D. Al
Alll of
of the
these
se
(Milan, 2016)

94. Under the zero profit

profit method, contract revenue for the period is
A. Eq
Equa
uall to ze
zero
ro
B. Equal to thethe costs of constructio
construction
n recognized
recognized during
during the period
period
C. Equal to the contract
contract price
price divided
divided by the estimated
estimated constructio
constructionn period
D. Equal to the costs of construct
construction
ion recognized
recognized during the period
period that are probable
probable
of recovery
(Milan, 2016)

95. Under the percentage of completion method, contract revenue

revenue for the period is computed
A. Relat
Relationshi
ionshipp between costs
costs incurred
incurred to date and total
total expected
expected costs
B. Sur
Survey
veyss of wor
workk perfo
performe
rmed d
C. Indepe
Independent
ndent appraisal
appraisal of value
value of work performe
performed d in relation
relation to the contract
contract price
D. The amount of progress
progress billin
billings
gs in relation
relation to the total
total contract
contract price
(Milan, 2016)

96. Any expected loss

loss on a const
constructi
ruction
on contract is
A. Recogni
Recognized
zed as an expense immediat
immediately
ely as an adjustment
adjustment to the revenue
revenue already
already
recognized
B. Defer
Deferred
red and amortize
amortizedd over the remaini
remaining
ng constructi
construction
on period
period
C. Recogni
Recognized
zed as an expense
expense immediatel
immediatelyy in accordance
accordance with
with PFRS 15.
D. Recogni
Recognized
zed as a provisi
provision
on in accordance
accordance with PAS
PAS 37
E. Igno
norred
(Milan, 2016)

97. Which of the following does not indicate that a promise to transfer a good or service
service is
separately identifiable?
A. The good or service
service is
is not an input
input to a combined
combined output specif
specified
ied by the
customer
B. The good or service
service does not signif
significantl
icantly
y modify another
another good or service
service
 promised in the contract
C. The customer’s
customer’s decisio
decision
n of not purchasing
purchasing a good or service
service affects
affects the other
 promised goods or service in the contract.
(Milan, 2016)

For Items #98-100, use the following information:

Johnson Enterprises uses the cost recovery method for all installment sales. Complete the table:
 2014 2015 2016
Installment sales P80,000 P95,00 P?
Cost of installment sales P? 56,050 68,250
Gross profit percentage 38% ? 35%
Cash collections:
2014 sales 25,600 46,400 5,600
2015 sales 22,800 ?
2016 sales 32,550
Realized Gross Profit on
? ? 16,050
Installment Sales

98. The installmen

installmentt sales in 2016
A. P92,
P92,13
137.
7.55
B. 105,000
000
C. 112,
112,61
612.
2.55
D. 195,
195,00
000
0

99. The cost of installment

installment sales
sales in 2014 is
A. Zero
B. P30,400
400
C. P47,619
619
D. P49,
P49,60
6000

100.
100. The gros
The grosss pro
profi
fitt rat
ratee in
in 2015
2015 is
A. 29%
B. 41%
C. 59%
D. Cannot
Cannot be determ
determine ined
d
(Dayag, 2016)
101.
101. The insta
The install
llme
ment
nt meth
method
od of reco
recogn
gniz
izin
ing
g revenu
revenuee
A. Should be used only in cases in which no reasonable basis exists for estimating
the collectibility of receivables.
B. Is not a generally
generally accepted
accepted accounting
accounting principle
principle under
under any circumstance
circumstances.s.
C. Should be used
used for book
book purposes
purposes only if it is used
used for tax purpose
purposes.
s. S, S & S
D. Is an acce
accept
ptab
able
le alte
altern
rnat
ativ
ivee acco
accoun
unti
ting
ng prin
princi
cipl
plee for
for a firm
firm that
that make
makess inst
instal
allm
lmen
entt
sales.
(Tan, 2017)
102. The instal
installment
lment method of recogniz
recognizing
ing profit
profit for accounting
accounting purpose
purposess is acceptable
acceptable if
if
A. Collections
Collections in
in the year of sale do not exceed
exceed 30% of the total
total sales price.
price.
B. An unreali
unrealized
zed profit
profit account is credit
credited.
ed.
C. Collection
Collection of the
the sales price is not reasonably
reasonably assured.
assured.
D. The method
method is consistentl
consistently
y used for all sales
sales of similar
similar merchandis
merchandise.e.

103.
103. When
When usi
using
ng the
the ins
insta
tall
llme
ment
nt sal
sales
es met
metho
hod,d,
A. Gross profit is deferred until all cash is received, but revenues and costs are
recognized in proportion to the cash ca sh collected from the sale.
B. Gros
Grosss prof
profit
it is reco
recogngniized
zed onl
only afte
afterr the amou
amount
nt of cash
cash col
collect
lected
ed exce
exceed
edss the
the cos
cost
of the item sold.
C. Revenue, costs, and gross profit are recognized proportionally as the cash is
received from the sale of product.
D. Total revenues and costs are recognized at the point of sale, but gross profit is
deferred in proportion to the cash that is uncollected from the sale.

104. Spicer Corpora oration has a nor

normal gross profi
ofit on inst
nstallment sale
ales of 30%. A 2014 sale
ale
result
ulted in a default early in 201
2015. At the date of default, the balance of the installment ent
receiv
eivabl
able was P24,000 and the repossessed mercha chandise had a fair value of P13P13,500.
00.
Asssum
As umining
g the repo
reposssess
essed merch
erchan
andi
disse is to be reco
record
rded
ed at fair
fair val
value,
ue, the
the gai
gain or los
loss on
repossession should be:
A. P0
B. P3,3
P3,300
00 loss
loss
C. P5,0
P5,000
00 loss
loss
D. P7,5
P7,500
00 loss
loss
(Dayag, 2015)

105. Western Appliance Company, which began business on January 1, 2006,

appr
approp
oprriate
iately
ly uses
uses the
the ins
install
tallme
ment
nt sales
ales meth
method
od of acco
accoun
untting.
ing. ThThee fol
followi
lowing
ng dat
data are
are
available for 2006:
Installment sales $ 3 5 0 ,0 0 0
Cash collections on installment sales 150 ,000
Gross profit on sales 40%

The gross profit on installment sales for 2006 should be:

A. Realized:
Realized: $60,000;
$60,000; Deferr
Deferred:
ed: $80,000
B. Realiz
Realized:
ed: $80,000
$80,000;; Deferred
Deferred:: $60,000
$60,000
C. Realized:
Realized: $140,000;
$140,000; Deferred:
Deferred: $80,000
D. Realized:
Realized: $140,000;
$140,000; Deferred:
Deferred: 60,000
 (highered.mheducation.com, 2007)

106. The Pattison Company began gan operations on Januanuary 2, 200

2006, and appr
ppropr
opriately use
uses
the
the inst
instal
allm
lmen
entt sale
saless meth
method
od of acco
accoun
unti
ting
ng.. Th
Thee foll
follow
owin
ing
g data
data are
are avai
availa
labl
blee for
for 2006
2006 and
and
2007:
2006 2007
Installment sales $600,000 $750,000
Cash collections from:
2006 sales 200,000 250,000
2007 sales 300,000
Gross profit on sales 30% 40%

The deferred gross profit that would appear in the 2007 balance sheet is:
A. $180
$180,0
,000
00
B. $200
$200,0
,000
00
C. $285
$285,0
,000
00
D. $225
$225,0
,000
00
(highered.mheducation.com, 2007)

107. In 201
2013, Merchachandise was sold by on installment basi asis by MB Comompa
pan
ny for P80,000
000
at a gross
oss profit of 25%
25% of cos
cost. During the year, a total of P42P42,500 including interest of 
P12,
P12,50
500
0 was
was coll
collec
ectted on this
this cont
contrract.
act. In 2013
2013,, no coll
collec
ecttion
ion was
was made
made on this
this sal
sale, and
and
the merchandise was repossessed. The FV of the merchandise is P34,000 after  
reconditioning cost of P4,000. What is the gain (loss) on repossession?
A. (P10
(P10,0
,000
00))
B. (P14,
P14,00
000)
0)
C. P10,000
000
D. (P20
(P20,0
,000
00))
(Guererro, 2013)

108. BMW Corporation sells car on a three year inst nstallment sales contrntract. On Decem cember 
31,
31, 2013
2013,, the
the last
ast day
day on BMW’
BMW’ss firs
firstt year
year of oper
operat
atio
ions
ns,, the
the res
results
ults of oper
operat
atiions
ons bef
before
ore
adjustment are summarized as follows
Sales 1,000,000
Cost of Installment Sales 700,000
Operating Expenses 8 0 ,0 0 0
 The tota
The totall coll
collec
ecti
tion
onss duri
during
ng the
the year
year incl
includ
udin
ing
g inte
intere
rest
st and
and fina
financ
ncin
ing
g char
charge
gess of P100
P100,0
,000
00
is P500,000. What is the net income of BMW Corp for the year ended December 31,
2013?
A. P220
P220,0 ,000
00
B. P140
P140,0 ,000
00
C. P150
P150,0 ,000
00
D. P120
P120,0 ,000
00
(Guererro, 2013)

109. The following informati ation are obt

obtain
ained from the books of accou
counts of Robin
bin Inc. on
June 30, 2013:
Deferred gr
gross p
prrofit ba
balance (A
(After Ad
Adjustment) 202 ,000
Total Collection on Installment Sales 44 0 ,00 0
Gross Profit based on cost 25%

Robi
Robinn Inc uses
uses the
the inst
instal
allm
lmen
entt metho
ethod
d of acco
accoun
unti
ting
ng.. What
hat is Robi
Robin’
n’ss tot
total insta
nstalllmen
lmentt
sales for 2013?
A. P1,5
P1,560
60,0
,000
00
B. P1,4
P1,440
40,0
,000
00
C. P1,4
P1,450
50,0
,000
00
D. P1,0
P1,010
10,0
,000
00
(Guererro, 2013)

110. JJ Company sold goods on installment. For the year ended, the following were
reported:
Installment Sales P3,000,000
Cost of Installment Sales 2,025,000
Collections on Installment Sales 1,800,000
Repossessed Accounts 200,000
FV of repossessed merchandise 120,000

The repossession resulted to:

A. Gain
Gain of P5,00
P5,0000
B. Lo
Loss
ss of P80,
P80,000
000
C. No Gain
Gain;; No Lo
Lossss
D. Lo
Loss
ss of P15,
P15,000
000
(Guererro, 2013)
111. Pie Co. uses the installment sales method to recognize revenue. Customers pay the
inst
instal
allm
lmen
entt note
notess in 24 equa
equall mo
montnthl
hly
y amou
amount
ntss, whi
which incl
includ
udee 12%
12% int
interes
erestt. What
hat is an
installment notes receivable balance six months after the sale?
A. 75% of thethe origin
original
al sales
sales price.
price.
B. Less than 75%75% of the original
original sales price.
price.
C. The present
present value
value of the remaining
remaining monthl
monthly y payments
payments discounted
discounted at 12%.
12%.
D. Less than
than the present
present value of remaining
remaining monthly
monthly payments
payments discounted
discounted at 12%.
12%.
(AICPA 1192T-9)

112.
112. The insta
The install
llme
ment
nt meth
methodod of reco
recogn
gniz
izin
ing
g revenu
revenuee
A. shoul
houldd be used
used onl
only in case
casess in whic
which h no reas
easonab
onable le bas
basis exi
exists
sts for est
estimat
imatining
g the
the
collectibility of receivables.
B. is not a generally
generally accepted
accepted accounting
accounting principle
principle under any circums
circumstances
tances..
C. should
should be used for book
book purposes
purposes only
only if it is used
used for tax
tax purposes.
purposes.
D. is an acce
accept
ptab
able
le alte
altern
rnat
ativ
ivee acco
accoun
unti
ting
ng prin
princicipl
plee for
for a firm
firm that
that make
makess inst
instal
allm
lmen
entt
sales.
(S, S & S)

113. Slick's Used Cars sells pre-owned cars on the installment basis and carries its own
note
notess beca
becaus
usee its
its cust
custom
omer
erss typi
typica
call
lly
y cann
cannot
ot qual
qualif
ify
y for
for a bank
bank loan
loan.. Defa
Defaul
ultt rate
ratess tend
tend to
 be high or unpredictable. However, in the event of nonpayment, Slick's can usually
repossess the cars without loss. The revenue method Slick would use is the:
A. Instal
Installme
lmentnt sales
sales meth
method.
od.
B. Point
Point of sales
sales method.
method.
C. Cost
Cost rec
recov
over
eryy
D. Comple
Completedted contrac
contractt
(S, S & S)

114.
114. When
When usi
using
ng the
the ins
insta
tall
llme
ment
nt sal
sales
es met
metho
hod,d,
A. Gross profit is deferred until all cash is received, but revenues and costs are
recognized in proportion to the cash ca sh collected from the sale.
B. Gros
Grosss prof
profit
it is reco
recogngniized
zed onl
only afte
afterr the amou
amount
nt of cash
cash col
collect
lected
ed exce
exceed
edss the
the cos
cost
of the item sold.
C. Revenue, costs, and gross profit are recognized proportionally as the cash is
received from the sale of product.
D. Total revenues and costs are recognized at the point of sale, but gross profit is
deferred in proportion to the cash that is uncollected from the sale.
(S, S & S)
115..
115 Cash
Cash collec
collectio
tion
n is a crit
critica
icall event
event for
for incom
incomee recogni
recognitio
tion
n in the
the
A B C D

Cost-recovery method No Yes No Yes

Installment method No Yes Yes No

(AICPA 1193 T- 39)

116. For financial

financial statement
statement purposes,
purposes, installmen
installmentt method
method of accounti
accounting
ng may
may be used if:
A. Collection
Collection period
period extends
extends over more
more than 12 months.
months.
B. Installmen
Installmentsts are
are due in differ
different
ent years.
years.
C. Ultimate
Ultimate amount
amount collect
collectible
ible is
is indeterm
indeterminate.
inate.
D. Percentage-o
Percentage-of-com
f-completio
pletionn method isis inappropriat
inappropriate.
e.
(AICPA 1193 T- 6)

117. Hogan Farms produced 800,000 pounds of cotton during the 2010 season. Hogan
sell
sellss all
all of its cott
cotton
on to Ott
Ott Co.,
Co., which
hich has
has agre
agreed
ed to pur
purchas
chasee Hoga
Hogan' n'ss enti
entire
re prod
produc
ucttion
ion
at the prevaivailing market price. Recent ent legisgislation assures that
hat the mark arket pri
price will notnot
fall below $.70 per pound during the next two years. Hogan's costs of selling and
dist
distri
ribu
buti
ting
ng the
the cott
cotton
on are
are imma
immate
teri
rial
al and
and can
can be reas
reason
onab
ably
ly esti
estima
mate ted.
d. Hoga
Hogan n repo
report
rtss its
its
inve
inventntor
oryy at expe
expect
cted
ed exi
exit valu
value.
e. Dur
Duringing 2010
2010,, Hoga
Hogann sold
old and
and del
deliver
ivered
ed to Ott
Ott 600,
600,00000 0
 pounds at the market price of $.70. Hogan sold the remaining 200,000 pounds during
2011 at the market price of $.72. What amount of revenue should Hogan recognize in
2010?
A. $420
$420,0,000
00
B. $432
$432,0,000
00
C. $560
$560,0,000
00
D. $576
$576,0,000
00
(Wegyandt & Warfield 13e)
118. Hartz Co., which began operations on January 1, 2010, appropriately uses the
inst
instal
allm
lmenentt sales
ales metho
ethod
d of acco
accoununti
ting
ng.. Th
Thee follo
ollowi
wing
ng info
inforrmati
mationon per
pertai
tains to Hart
Hartz' z'ss
oper
operatatio
ions
ns for
for the
the year
year 2010
2010:: Inst
Instal
allm
lmenentt sale
saless $1,2
$1,200
00,0
,000
00 Regu
Regulalarr sale
saless 480,
480,00
0000 Cost
Cost of 
installment sales 720,000 Cost of regular sales 288,000 General and administrative
expenses 96,000 Collections on installment sales 288,000.

The deferred gross profit account in Hartz's December 31, 2010 balance sheet should be
A. $115
$115,2
,200
00..
B. $192
$192,0
,000
00..
 C. $364
$364,8
,800
00..
D. $480
$480,0
,000
00..
(Wegyandt & Warfield 13e)

119. On January 1, 2010, Orton Co. sold a used machine to King, Inc. for $350,000. On
this date, the machine had a depreciated cost of $245,000. King paid $50,000 cash on
January 1, 2010 and signed a $300,000 note bearing interest at 10%. The note was
 payable in three annual installments of $100,000 beginning January 1, 2011. Orton
appr
approp
oprriate
iately
ly acco
accoun
unte
ted
d for the sale
ale unde
underr the
the inst
instal
allm
lmen
entt metho
ethod.
d. King
King made
ade a timel
imely
y
 payment of the first installment on January 1, 2011 of $130,000, which included interest
of $30,000 to date of payment. At December 31, 2011, Orton has deferred gross profit of
A. $70,
$70,00
000.
0.
B. $66,
$66,00
000.
0.
C. $60,
$60,00
000.
0.
D. $51,
$51,00
000.
0.
(Wegyandt & Warfield 13e)

120. Dianne company sells gross on the installment plan uses the installment sales
meth
method
od.. On june
june 1, 20x1
20x1,, Diann
iannee sold
old a mach
machin
inee which
hich cost
cost P75,
P75,00
000
0 to Ber
Bert cor
corpora
porati
tion
on
for P100,000. Bert corp, made two payments of P20,000 each during 19x1, before
defaulting on the contract in 20x2. Dianne repossessed the machine which had a fair 
market value of P52,500 when Dianne reacquired it. The gain (loss) on repossession is:
A. 7500
7500 los
losss
B. 7,50
7,500
0 gai
gainn
C. 17,5
17,500
00 loss
loss
D. 17,5
17,500
00 gain
gain
(CPAR Handout 2016)

121.
121. For
For finan
inanci
cial
al stat
statem
emen
entt purp
purpos
oses
es,, the
the insta
nstalllmen
lmentt meth
method
od of acco
accoun
unti
ting
ng may
may be use
use if 
the
A. Collection
Collection period
period extends
extends over more
more than 12 months.
months.
B. Installmen
Installmentsts are
are due in differ
different
ent years.
years.
C. Ultimate
Ultimate amount
amount collect
collectible
ible is
is indeterm
indeterminate.
inate.
D. Percentage-o
Percentage-of-com
f-completio
pletionn method is is inappropriat
inappropriate.
e.
(AICPA 1191 T-6)

122..
122 The metho
method
d most
most commonl
commonly y used to
to report
report defau
defaults
lts and
and reposs
repossess
ession
ionss is:
A. Provide
Provide no basis for the
the repossessed
repossessed asset
asset thereby
thereby recognizing
recognizing a loss.
loss.
 B. Record the repossessed merchandise at fair value, recording a gain or loss if 
appropriate.
C. Record the
the repossessed
repossessed merchandis
merchandisee at book value, recordin
recording
g no gain or loss.
D. None
None of thes
these.
e.
(K, W & W)

123.
123. Acco
Accorrding
ding to the ins
install
tallme
ment
nt meth
method
od of acco
accoun
untting,
ing, gros
grosss prof
profit
it on an insta
nstalllmen
lmentt sale
ale
is recognized in income
A. On the
the dat
datee of sal
sale.
e.
B. On the date
date the final
final cash
cash collectio
collection
n is received.
received.
C. In propor
proportio
tionn to the cash
cash collect
collection
ion..
D. After cash
cash collections
collections equal
equal to the cost of sales
sales have been received
received..
(AICPA M0595 F-27)

124. During 2014, Vaughn Corporation sold merchandise costing $2,250,000 on an

inst
instal
allm
lmen
entt basi
basiss for
for $3,0
$3,000
00,0
,000
00.. Th
Thee cash
cash rece
receip
ipts
ts rela
relate
ted
d to thes
thesee sale
saless were
were coll
collec
ecte
ted
d as
foll
follow
ows:
s: 2014
2014,, $1,2
$1,20000,0
,000
00;; 2015
2015,, $1,0
$1,050
50,0
,000
00;; 2016
2016,, $750
$750,0
,000
00.. What
What is the
the rate
ate of gros
grosss
 profit on the installment sales made by Vaughn Corporation during 2014?
A. 75%
B. 60%
C. 40%
D. 25%
( Bartleby
 Bartleby Review Questions)
(Items 125-133, not aligned with the topic assigned)

For Items #125-130, use the following information:

Season
Seas onss Co
Cons
nsttru
ruct
ctiion is co
cons
nstr
truc
ucttin
ing
g an of
offfic
icee bu
buiild
ldin
ing
g un
unde
derr co
cont
ntrrac
actt for Ca
Cann
nnon
on Co
Comp
mpanany.
y.
The contract calls for progress billings and payments of $1,240,000 each quarter. The total
contract price is $14,880,000 and Seasons estimates total costs of $14,200,000. Seasons
estimates that the building will take 3 years to complete, and commences construction on
January 2, 2014. 1. At Decem embe
berr 31, 201
014
4, Seasons es esttimates that it is 30% co
commplet
etee with the
construction, based on costs incurred.
125. What is the total amount of Revenue from Long-Term Contracts recognized for  
2014?
A. $4,960,000
B. $4$4,2
,260
60,0
,000
00
C. $4,464,000
D. $4,260,000
126. What is the balance in the Accounts Receivable account assuming Cannon Cafe has
not yet made its last quarterly payment?
A. $4
$4,9
,960
60,0
,000
00
B. $1
$1,2
,240
40,0
,000
00
C. $1
$1,2
,240
40,0
,000
00
D. $4
$4,9
,960
60,0
,000
00

127. At Decem embe

berr 31, 201 0155, Seasaso
ons Cononsstruct
ctiion estimat ates
es that it is 75% complete with
thee bu
th buil
ildi
ding
ng;; ho
howeweve
verr, th
thee es
esttim
imat
atee of tot
otal
al co
cossts to be inincu
currred ha
hass ris
isen
en to $1
$14,
4,40
400,
0,00
000
0
duee to un
du unan
anttic
iciipa
pate
ted
d pr
pric
icee in
incr
crea
easses
es.. Wha
hatt is the to
tota
tall am
amou
ountnt of Co
Cons
nstr
truc
ucttio
ion
n Ex
Expe
pens
nses
es
that Seasons will recognize for the year ended December 31, 2015?
A. $1
$10,
0,80
800,
0,00
000
0
B. $6
$6,3
,300
00,0
,000
00
C. $6
$6,3
,390
90,0
,000
00
D. $6
$6,5
,540
40,0
,000
00

128. At Decem embeberr 31, 2010155, Seasaso

ons Con onsstruct
ctiion estimat
ates
es that it is 75% complete with
thee bu
th buil
ildi
ding
ng;; ho
howe
weveverr, th
thee es
esttim
imat
atee of tot
otal
al co
cossts to be in
incu
currred ha
hass ris
isen
en to $1
$14,
4,40
400,
0,00
000
0
duee to un
du unananti
tici
cipa
pateted
d pr
pric
icee inc
ncrrea
easses
es.. Wha
hatt is rep
epor
orte
tedd in th
thee ba
bala
lanc
ncee sheheet
et at De
Dece
cemb
mber 
er 
31, 2015 for Seasons as the difference between the Construction in Process and the
Billings on Construction in Process accounts, and is it a debit or a credit?
A. $3,380,000 Credit
B. $1,240,000 Debit
C. $8
$880
80,0
,000
00 Debitt
Debi
D. $1,240,000 Credit

129. Seasaso
ons Cons
nsttruction com
omplpleetes the rem
emaaini
nin
ng 25% of the bu
buiilding cons
nsttruction on
December 31, 2016, as scheduled. At that time the total costs of construction are
$15,000,000. What is the total amount of Revenue from Long-Term Contracts
A. $14,880,000
B. $3,720,000
C. $3,720,000
D. $3,750,000

130. Construction Expepen

nses that Seas
aso
ons will reco
cog
gnize for the ye
yeaar end
ndeed Decem
embe
berr 31,
2016?
A. $1
$15,
5,00
000,
0,00
000
0
B. $ 3,75
3,750,
0,00
000
0
C. $ 4,20
4,200,
0,00
000
0
 D. $ 3,7
3,750
50,0
,000
00
(Bartleby Review Questions)

131.
131. The conver
The converged
ged stastanda
ndard
rd on rev
revenu
enuee recogn
recognititio
ion
n
A. Reduces thethe number of disclos
disclosures
ures required
required for revenue
revenue reportin
reporting
g
B. Incre
Increases
ases the complex
complexity
ity of financia
financiall statement
statement preparati
preparationon
C. Recogni
Recognizes
zes and measures
measures revenue
revenue based on changes
changes in assets
assets and liabilitie
liabilitiess
D. Simpl
Simplifies
ifies revenue
revenue recognition
recognition practices
practices across entities
entities and industries
industries
(Dayag, 2015)
132..
132 132. The firs
firstt step
step in the proc
process
ess for rev
revenue
enue rec
recogni
ognitio
tion
n is to
to
A. Det
Determ
ermine
ine the trans
transact
action
ion price
price
B. Ident
Identify
ify the
the contract
contract with the custome
customerr
C. Alloc
Allocate
ate the transacti
transaction
on price to the separate
separate performa
performance
nce obligations
obligations..
D. Ident
Identify
ify the separate
separate performanc
performancee obligations
obligations in the contract
contract
(Dayag, 2015)

133..
133 The secon
secondd step
step in the pro
proces
cesss for
for revenu
revenuee recogn
recogniti
ition
on is
is to
A. Alloc
Allocate
ate transaction
transaction price
price to the separate performa
performance
nce of obligations
obligations
B. Det
Determ
ermine
ine the
the transac
transactio
tion
n price
price
C. Ident
Identify
ify the contra
contract
ct with
with custom
customersers
D. Ident
Identify
ify the separate
separate performanc
performancee obligations
obligations in the contract
contract
(Dayag, 2015)

For Items #134-139, use the following information:

Pamp
Pampananga
ga Indu
Indust
stri
rial
al sell
sellss mach
machin
iner
ery
y on the
the inst
instal
allm
lmen
entt plan
plan.. On Sept
Septem
embe
berr 01,
01, 2015
2015,, Pamp
Pampananga
ga
ente
ntered into an installmentent sale
ale cont
ontract with GMA Produc ductions
ons for a six-y
x-year
ear per
period. Equal
annu
annual
al paym
paymen
ents
ts unde
underr the
the inst
nstallm
allmenentt sal
sale are
are P187
P187,5
,500
00 and
and are
are due
due on Augu
August st 31 of each
each year 
year 
 beginning in 2016.

Additional information:

■ The cost of the machinery sold to GMA was P637,500

■ The implicit interest rate on the installment sales is 10%
■ Pampanga industrial uses calendar year as a result of the above transaction and uses
effective-interest rate method of amortizing any discount
■ The present value factors at 10% for six period are as follows:
 Year PV of P1 PV of annuity of P1
1 .9091 .9091
2 .8264 1.7355
3 .7513 2.4869
4 .6830 3.1699
5 .6209 3.7908
6 .5645 4.3553

134. Assuming that circumstances are such that the collection of the installments due
unde
underr the
the cont
contra
ract
ct is reas
reason
onab
ably
ly assu
assure
red,
d, comp
comput
utee the
the real
realiz
ized
ed gros
grosss prof
profit
it on inst
instal
allm
lmen
entt
for 2015 (rounded)
A. 0
B. P81,250
250
C. P179
P179,1
,119
19
D. 487,
487,50
5000

135.
135. Comp
Comput
utee the
the tota
totall inco
income
me for
for 201
2015
5 (roun
(rounde
ded)
d)
A. P27,
P27,22
2211
B. P 108,
108,24
2411
C. P 206,
206,34
3400
D. P541
P541,7,721
21

136. Compute the total income for 2016 (rounded) (No Answer, Correct Answer: P
78,134)
A. P7
P71,
1,22
2211
B. P1
P108
08,7
,741
41
C. P2
P206
06,3
,340
40
D. P2
P257
57,4
,433
33

137. Assuming that circumstances are such that the collection of the installments due
und
under the cont
ontract cannot
not be reasonably assured, com
compute the realized
zed gross profit on
installment for 2015 (rounded)
A. 0
B. P81,250
250
C. P179
P179,1
,119
19
D. P487
P487,5
,500
00
138.
138. Comp
Comput
utee the
the tota
totall inco
income
me for
for 201
2015
5 (roun
(rounde
ded)
d)
A. P2
P27,
7,22
2211
B. P108
P108,4,471
71
C. P206
P206,3,340
40
D. P541
P541,7,721
21

139.
139. Comp
Comput
utee the
the tota
totall inco
income
me for
for 201
2016
6 (roun
(rounde
ded)
d)
A. A.P7
A.P78,8,13
134 4
B. B.P1
B.P10101,4
,418
18
C. C. P102
P102,1 ,194
94
D. D.P1
D.P11919,3
,384
84
(Dayag, 2015)

140. Oro Company began operations on January 1, 2015 and appropriately uses the
installment
ent sales
ales method of acc
account
unting. The following data
ata are avail
ailable for 201
2015 and
and
2016:

2015 2016
Installment sales P1,500,000 P1,800,000
Gross profit on sale 30 % 40%
Cash collections from:2015 sales 500,000 6 0 0 ,0 0 0
2016 sales - 7 0 0 ,0 0 0

The realized gross profit for 2016 is:

A. 720,
720,00
000
0
B. 520,000
000
C. 460,000
000
D. 280,
280,00
000
0
(Guerrero, 2015)
 Part II: Long-term Construction
Construction Contracts
Contracts (141-280)

141. The theoret

theoretical
ical support
support for
for using
using the percentage-of
percentage-of-compl
-completion
etion method of accounti
accounting
ng
for long term construction projects is that it
A. Is more conservative
conservative than the complet
completed-con
ed-contract
tract method
B. Reports
Reports a lower net income
income figure
figure than the completed-c
completed-contrac
ontractt method
C. More closely
closely conforms
conforms to the cost princi
principle
ple
D. Produces
Produces a more realistic
realistic matching
matching of expenses
expenses with
with revenues
(Comprehensive Reviewer, Hilario Tan)

142. A company uses the percentage-of-completion method to account for a four year 
cons
constr
truc
ucti
tion
on cont
contra
ract
ct.. Prog
Progre
ress
ss bill
billin
ings
gs sent
sent in the
the seco
second
nd year
year that
that were
were coll
collec
ecte
ted
d in the
the
third year would
A. Be included
included in the calculation
calculation of the
the income recognized
recognized in the second
second year
B. Be included
included in the calculat
calculation
ion of the
the income recogniz
recognized
ed in the third
third year
C. Be included
included in the calculat
calculation
ion of the
the income recogniz
recognized
ed in the fourth
fourth year
D. Not be included
included in the
the calculation
calculation of the income
income recognized
recognized in any year
year
(Comprehensive Reviewer, Hilario Tan)

143. Cost of uncomplet

uncompleted ed contracts
contracts in excess
excess of related
related billings
billings in
in most
most cases
cases is
is shown
shown as
A. Curren
Currentt liabil
liability
ity
B. Lo
Long
ng term
term debt
debt
C. Curr
Curren
entt asse
assetsts
D. Inves
Investm
tmenents
ts
(Comprehensive Reviewer, Hilario Tan)

144. Billings
Billings on
on uncompleted
uncompleted contracts
contracts in excess
excess of related
related costs in most
most cases
cases is shown
shown as
as
A. Curren
Currentt liabil
liability
ity
B. Lo
Long
ng term
term debt
debt
C. Curr
Curren
entt asse
assetsts
D. Inves
Investm
tmenents
ts
(Comprehensive Reviewer, Hilario Tan)

145. The construction-in-progress account accumulates the following when the

 percentage-of-completion method is used
A. Constr
Construct
uction
ion cost
costss to date
date
B. Constructi
Construction
on costs
costs to date
date less payments
payments received
received
C. Constructi
Construction
on costs
costs to date
date less billings
billings to date
date
D. Constructi
Construction
on costs plus
plus gross
gross profit
profit earned
earned to date
 (Comprehensive Reviewer, Hilario Tan)

146. The principal disadvantage of using the percentage-of-completion method of  

recognizing revenue from long term contracts is that it
A. Is unaccept
unacceptable
able for income tax purpose
purposess
B. Gives results based upon estimates which may be subject to considerable
uncertainty
C. Is likely to assign a small amount of revenue to a period during which much
revenue was actually earned
D. None
None ofof the
these
se
(Comprehensive Reviewer, Hilario Tan)

147.
147. In acco
accoununti
ting
ng for
for long
long term
term cons
constr
truc
ucti
tion
on cont
contra
ract
ct usin
using
g the
the perc
percen
enta
tage
ge-o
-of-
f-co
comp
mple
leti
tion
on
method, the gross profit recog cognized duri uring the first year
ear woul
ould be the estimated total
gros
grosss prof
profiit from
rom the
the cont
contra
ract
ct,, multi
ultipl
plie
ied
d by the per
percent
centag
agee of the
the cos
costs incur
ncurre
red
d duri
during
ng
the year to the
A. Total
Total cost
cost incu
incurre
rred
d to date
date
B. To
Tota
tall estim
estimat
ated
ed cost
cost
C. Unbilled
Unbilled portion
portion of the contract
contract price
price
D. Total
Total contrac
contractt price
price
(Comprehensive Reviewer, Hilario Tan)

148. Bon Construction Company has consistently used the percentage-of-completion

method of recognizing income. During 2015, Bon started work on a P3,000,000
cons
constr
truc
ucti
tion
on cont
contra
ract
ct whic
whichh was
was comp
comple
lete
ted
d in 2012
2012.. Th
Thee acco
accoun
unti
ting
ng reco
record
rdss prov
provid
ided
ed the
the
following data:
2015 2016
Progress billings P1,100,000 P1,900,000
Costs incurred each year 900,000 1,800,000
Collections 700,000 2,300,000
Estimated cost to complete 1,800,000

How much income should Bon have recognized in 2016?

A. 100,
100,00
0000
B. 110,000
000
C. 150,000
000
D. 200,
200,00
0000
(Dayag, 2016)
149. Ube Construction Company has consistently used the percentage-of-completion
meth
methodod.. On janu
januar
aryy 10,2
10,201
015,
5, Ube
Ube bega
begann work
work on a P6,0
P6,000
00,0
,000
00 cons
constr
truc
ucti
tion
on cont
contra
ract
cts.
s. At
the
the ince
inceptptio
ion
n date
date,, the
the esti
estima
mate
ted
d cost
cost of cons
constr
truc
ucti
tion
on was
was P4,5
P4,500
00,0
,000
00.. Th
Thee foll
follow
owin
ingg data
data
relate to the progress of the contract:

Income recognized at 12/31/2015 P600,000

Cost incurr
urred 1/10/2015 thr
thro
ough 12/31/2016 3,600
600,000
Estimated cost sto complete at 12/31/2016 1,200,000

How much income should Ube recognized for the year ended December 31,2016?
A. P300
P300,0
,000
00
B. 525,00
,000
C. 600,00
,000
D. 900,
900,00
000
0
(Dayag, 2016)

150. Lovelyely Co. recogni

gnizes
zes revenu
enue and expense nses using the perc
ercenta
ntage-
ge-of-
of-completion
meth
method
od.. Dur
During
ing 2015
2015,, a singl
inglee long
long-t
-ter
erm
m proj
projec
ectt was
was begu
begun,
n, whi
which cont
contin
inue
ued
d throu
hrough
gh
2016. Information on the project follows:
2015 2016
Accounts
nts recei
ceivable from cons
onstructi
ction con
contract P100,0
0,000 P30
P300,000
Construction expenses 105,000 192,000
Construction in progress 122,000 364,000
Partial billings on contract 100,000 420,000

Profit recognized from the long term construction contract in 2016 should be
A. P 50,0
50,000
00
B. 108,00,000
C. 128,00,000
D. 228,
228,00
000
0
(Dayag, 2016)

151..
151 Contra
Contract
ct revenu
revenuee in
in const
construc
ructio
tion
n contr
contract
act compri
comprise
se
A. The initial
initial amount
amount of revenue
revenue agreed
agreed in the contract
contract only
only
B. Variation
Variation in contract
contract work,
work, claims
claims and incentive
incentive payment
payment only
only
C. The initial amount of reve
evenue agre
greed in the con
contract,
ct, variati
ation in con
contract work,
claim and incentive payment
D. The initial
initial amount
amount of revenue agreed
agreed in the contract
contract and progress
progress billings
billings
(Punzalan, 2018)
 152. The percentage of completion of a construction contract is based on all of the
following, except
A. Th
Thee prop
propor
orttion
ion that
hat cont
contra
ract
ct cos
costs incur
ncurrred for wor
work perf
perfor
orm
med to date
date bear
bear to the
estimated total contract costs
B. Survey
Survey of work
work perfor
performed
med
C. Completion
Completion of a physical
physical proporti
proportion
on of the
the contract
contract work
work
D. Progress
Progress payments
payments and advances
advances received
received from
from customers
customers
(Punzalan, 2018)
153. The calculation of the income recognized in the third year of a 5-year construction
contract accounted for using the percentage of completion method includes the ratio of
A. Total costs
costs incurred
incurred to
to date to total
total estimate
estimated d costs
B. Total costs incurred
incurred to date
date to total
total billing
billingss to date
date
C. Costs incurred
incurred in year
year 3 to total
total estimat
estimateded costs
costs
D. Costs incurred
incurred in year
year 3 to total
total billin
billings
gs to date
date
(Punzalan, 2018)

154. In accounting for a long-term construction contract using the percentage of  

completion method, the progress billings on contract account is
A. Contra
Contra curre
currentnt asset
asset accoun
accountt
B. Contra
Contra non-c
non-currurrent
ent asset
asset accou
account
nt
C. Noncur
Noncurren
rentt liabil
liability
ity accoun
accountt
D. Reve
Revenue
nue accou
account nt
(Punzalan, 2018)

155. Which of the

the followi
following
ng is included
included in the cost
cost of
of fulfill
fulfilling
ing a constructi
construction
on contract?
contract?
A. Cost of
of hiring
hiring equipment
equipment used
used in the
the constructi
construction
on
B. General administration costs for which reimbursement is not specified in the
contract
C. Sell
Sellin
ing
g costs
costs
D. Depreciatio
Depreciation n of idle plant and
and equipment
equipment that is not used
used on a particular
particular contract
contract
(Milan, 2017)

The following data relate to a construction job started by Jay Company during 2016:
Total contract price P100,000
Actual costs during 2016 20,000
Estimated remaining costs 40,000
Billed to customer during 2016 30,000
Received from customer during 2016 20,000
 156. Any costs incurr urred are exp
expected to be recov
coverable. Under the cost
ost recov
covery method,-
cons
constr
truc
ucti
tion
on acco
accoun
unti
ting
ng((zer
zero-pr
o-prof
ofit
it),
), what
what amou
amount
nt shoul
hould
d Jay Comp
Compan any
y reco
recogn
gniize as
gross profit for 2016?
A. 0
B. 4,000
C. 10,000
D. 12,000
(Dayag, 2015)

157. X Company uses the percentage of completion method of recognizing income. In

201
2015, work was started on a P18,00
,000,000
000 job com
ompl
plet
eteed in 2017. Recor
cords in 2016 show
how
the following:
Progress billing P6,600,000
Costs incurred 5,400,000
Collections 4,200,000
Cost to complete 10,800,000

Gross profit recognized in 2016 was:

A. 1,40
1,400,
0,00
0000
B. 1,20
1,200,
0,00
0000
C. 900,000
000
D. 600,
600,00
0000
(Guerrero, 2016)

For Items #158-160, use the following information:

In 2013, South Builders agreed to construct a commercial building at a price of P1,000,000.
Sout
South
h Bui
Builder
lderss uses
uses the per
percent
centag
agee of comp
comple
leti
tion
on meth
methodod of recog
ecogni
nizi
zing
ng reven
evenue
ue on long
long ter
term
construction projects. The data relating to the projects from 2014 to 2016 are as follows:

2014 2015 2016

Cost incurred each year P280,000 P320,000 P185,000
Estimated cost to complete 520,000 200,000 -
Billings to date 150,000 400,000 1,000,000
Collections of billings to date 120,000 320,000 940,000

158..
158 What
What is the amount
amount of gros
grosss profi
profitt to be recog
recogniz
nized
ed in
in 2015?
2015?
A. 80,000
B. 78,500
 C. 85,000
D. 90,000

159. What is the balance of construction in progress net of contract billings account of 
South Builders’ on December 31, 2015?
A. 350,
350,00
000
0
B. 300,000
000
C. 550,000
000
D. 380,
380,00
000
0

160. Assuming the company any uses the zer

zero profit of recog
cognizing reven
venue from the pro
project,
what is the balan
alancce of the const
nstruction in Progress acc
account net of contr
ntract billings as of 
December 31, 2015?
A. 200,
200,00
000
0
B. 250,000
000
C. 350,000
000
D. 300,
300,00
000
0
(Guerrero, 2016)

For Items #161-163, use the following information:

On Janua
anuary
ry 1, 2018
2018,, Hard
Hardrrock
ock Comp
Compan any
y star
tarted
ted the
the cons
consttruct
ructiion of a buil
buildi
ding
ng at a fixe
fixed
d cont
contra
ract
ct
 price of P1,000,000. On the same date, the customer paid a mobilization fee equal to 5% of 
cont
contra
ract
ct pric
pricee that
that will
will be dedu
deduct
ctib
ible
le from
from the
the firs
firstt bill
billin
ing.
g. Th
Thee outc
outcom
omee of cons
constr
truc
ucti
tion
on cont
contra
ract
ct
cannot be estimated reliably

Duri
During
ng 2018
2018,, the
the enti
entity
ty bill
billed
ed the
the cust
custom
omerer equi
equiva
vale
lent
nt to 30%
30% of the
the cont
contra
ract
ct pric
price.
e. Duri
During
ng 2019
2019,,
the ent
entity billed aga
again the cust
ustomer amounting to 20% of the cont ontract price.
ce. Duri
uring 2020, the
ent
entity
ity bill
billed
ed agai
againn the cus
customomer
er amou
amount
ntiing to 40%
40% of the
the cont
contra
ract
ct pric
price.
e. Th
Thee remai
emainining
ng bil
billing
ling
was made at the year of completion of the project.

The enti
ntity made col
collection from the customomerer at the end of 201
2018, 2019 and
and 202
2020, in the amou
amoun
nt
of P120,
20,000, P450,0
0,000 and P180,00 ,000, respectivel
vely. The entity pro
provided the following data
ata
concerning the direct costs related to the said project:

2018 2019 2020

Cumulative costs incurred at year-end 360,000 800,000 870,000
Remaining es
estimated co
costs to co
complete at
at year-end 840,000 250,000 50,000

161..
161 What
What is the realiz
realized
ed gross
gross profit
profit for the year
year ended
ended Decemb
December
er 31,
31, 2019?
2019?
 A. 50,000
000
B. 200,000
000
C. 150,000
000
D. 0

162. What is the excess of construction in progress over progress billings or excess of 
 progress billings over construction in progress on December 31, 2020?
A. 30,000
30,000 excess
excess billin
billings
gs
B. 80,000
80,000 excess
excess billin
billings
gs
C. 20,000 excess construction
construction in progres
progresss
D. 50,000 excess construction
construction in progres
progresss

163..
163 What
What is the
the balan
balance
ce of accou
accounts
nts receiv
receivabl
ablee on Decemb
December
er 31,
31, 2020?
2020?
A. 150,
150,00
0000
B. 100,000
000
C. 120,000
000
D. 50,000
(CPAR Reviewer, 2017)

164. When the outcome of a construction contract can be estimated reliably, what
accounting method shall be used by the long-term contractor for the recognition of 
construction revenue and construction cost?
A. Percen
Percentag
tagee of completi
completion
on method
method
B. Cost
Cost reco
recover
very y metho
method
d
C. Zero
Zero-p
-pro
rofi
fitt method
method
D. Instal
Installme
lment
nt method
method
(CPAR Reviewer, 2017)

165. When it is probable that total contract costs will exceed total contract revenue, how
should contractor account for the difference?
A. The expected
expected loss shall be recogniz
recognized
ed as an expense
expense immediatel
immediately.
y.
B. The expected
expected profit
profit shall
shall be recognized
recognized as a profit
profit immedia
immediately.
tely.
C. The expected loss shall be recognized as an expense taking into account the
 percentage of completion as of the end of the period.
D. The expected loss shall be recognized as a profit taking into account the
 percentage of completion as of the end of the period.
(CPAR Reviewer, 2017)
166. If the sale transaction provides for peri eriodic installments over an extended
ded period of 
time
time and
and the
the coll
collec
ecti
tibi
bili
lity
ty of the
the sale
saless pric
pricee cann
cannot
ot be reas
reason
onab
ably
ly esti
estima
mate
ted,
d, what
what meth
method
od
of revenue recognition is the most appropriate?
A. Cost
Cost recov
recoveryery method
method
B. Accr
Accrua
uall basi
basiss
C. Inst
Instal
allm
lment
ent meth
method od
D. Cash
Cash basi
basiss
(CPAR Reviewer, 2017)

167..
167 Under
Under instal
installme
lment
nt method
method of revenu
revenuee recogni
recognitio
tion,
n, which
which statem
statement
ent is true?
true?
A. Both sales
sales revenue
revenue and cost of goods sold sold are recognized
recognized at the point
point of sale.
B. Th
Thee relat
elated
ed gros
grosss prof
profiit of the
the inst
instal
alllment
mentss sales
ales is defe
deferr
rred
ed to thos
thosee per
period
iod dur
during
ing
which cash will be collected.
C. As receivables are collected, a portion of the deferred gross profit equal to the
gross profit rate times cash collected is recognized as income.
D. All of these
these statement
statement are true.
(CPAR Reviewer, 2017)

168. In instal
installment
lment sales,
sales, how
how should
should the deferred
deferred gross
gross profit
profit account
account be present
presented?
ed?
A. Asset valuati
valuation
on allowance
allowance or contract-r
contract-receivab
eceivable
le account
B. Unearn
Unearned ed revenue
revenue account
account
C. Eq
Equi
uity
ty accou
account
nt
D. Incom
Incomee accou
account
nt
(CPAR Reviewer, 2017)

169. Under the gross profit

profit realiza
realization
tion method,
method, first
first collections
collections are regarded
regarded as
A. Ex
Expe
pens
nses
es
B. Gros
Grosss pro
profi
fitt
C. Cost
Cost rec
recov
over
ery y
D. Return
Return of invest
investment
ment
(Guerrero, 2013)

170. Under the installment method, the difference between selling price and the cost of 
sale is recorded as:
A. Deferr
Deferred
ed Gross
Gross Profit
Profit
B. Income
C. Asset
D. ExExpe
pens
nsee
(Guerrero, 2013)
(Items #171-174, 178-180 not aligned with the topic)

171. Direct costs of franchise incurred by a franchisor that are within the scope of PFRS
15 are recognized as expense during the
A. immed
immediate
iate recogni
recognition
tion princi
principle
ple
B. eff
effect
ective
ive int
intere
erest
st meth
methodod
C. con
concept
cept of conse
conserva
rvativ
tivee or prudence
prudence
D. ma
matc
tchi
hing
ng conce
concept
pt
(Advance Accounting and Reporting I, Millan 2016)

172.
172. If a fr fran
anch
chis
isee co
cont
ntra
ract
ct req
equi
uire
ress th
thee fra
ranc
nchi
hissor to un
unde
derrta
take
ke ac
acti
tivi
viti
ties
es ththat
at wo
woul
uld
d af
afffec
ectt
thee fr
th fran
anch
chisisor
or’s
’s in
inte
tell
llec
ectu
tual
al pr
prop
oper
erty
ty to wh
whic
ich
h th
thee fr
fran
anch
chis
isee
ee ha
hass ri
righ
ghts
ts,, th
thee pe
perf
rfor
orma
mancncee
obligation is satisfied
A. at a pin
pintt in
in tim
timee
B. ov
overer tim
imee
C. un
undederr ti
time
D. al
alll the
the ti
time
me
(Advance Accounting and Reporting I, Millan 2016)

173. PFRS 15 requires how many steps in recognizing revenue from contracts with
customers?
A. 2
B. 3
C. 4
D. 5
(Advance Accounting and Reporting I, Millan 2016)

174.
174. ReReve
venu
nuee from the fra ranc
nchi
hisse co
cont
ntra
ract
ctss sh
shal
alll be rec
ecog
ogni
nize
zed
d in ac
acco
corrda
danc
ncee wi
witth wh
whiich of 
the following reporting standards?
A. PA
PAS S 18,
18, Par
Partt B
B. PFRS 15 15
C. FA
FAS S No.
No. 45 (U (US
S GAAP
GAAP))
D. Al
Alll of
of the
the abo
aboveve

(Advance Accounting and Reporting I, Millan 2016 

 )

175..
175 Accord
According
ing to PFRS
PFRS 15, a good
good or
or serv
service
ice is distin
distinct
ct if?
if?
A. the entity
entity regularly
regularly sells
sells the good
good or service
service separatel
separately
y
 B. the customer can benefit from it, either on its own or together with other  
resources that are readily available to the customer
C. none
none of the
the abo
above
ve
D. A and B
(Advance Accounting and Reporting I, Millan 2016)

176.
176. Unde
Underr PFRS
PFRS 1515 reve
revenu
nuee is mea
measu
sure
red
d
A. at the fair value
value of the considerat
consideration
ion received
received or receivable
receivable in the contract
contract
B. at the amount of transaction price allocated to a performance obligation that is
Satisfied
C. at the stand-alon
stand-alonee selling
selling price of the promised
promised good
good service
service in the contract
contract
D. any
any of
of the
these
se
(Advance Accounting and Reporting I, Millan 2016)

177..
177 The prim
primary
ary issu
issuee in accoun
accountin
ting
g for constr
construct
uction
ion cont
contrac
racts
ts is
is
A. the
the allo
alloca
cati
tion
on of cont
contra
ract
ct reve
revenu
nuee to the
the acco
accoun
unti
ting
ng peri
period
odss in whic
which
h cons
constr
truc
ucti
tion
on
work is performed
B. the all
allocati
ation of contractact costs to the accoun
ounting periods
ods in which construction
work is performed
C. the determi
determination
nation of the percentage
percentage of completion
completion
D. A and B
(Advanced Financial Accounting Part 1 2015 By Z. Millan)

178. Raphahaeel Company paid 20 20,,000,

0,0
000 for the net assets of Paris Cor
orpporation an and
d Paris
was then dissolved. Paris had no liabilities. The fair values of Paris’ assets was
P2,5
P2,500
00,0
,000
00.. Pa
Parris
is’’ on
only
ly no
non-
n-cu
currre
rent
nt as
assset
etss wer
eree lan
and
d an
and
d eq
equi
uipm
pmen
entt wi
witth fai
airr va
vallue
uess of 
P160,000 and P640,000. At what value will the equipment be recorded by Raphael?
A. 64
640,
0,00
000
0
B. 400,00000
0
C. 240,00000
0
D. 0
(Advanced Accounting Part 1, 2012 ed. By Baysa/Lupisan)

179. Park Compan any

y ac
acq
quired a 90% interest in Southwester
ern
n Company on Dec eceember 31
31,,
2014 for P320,000. During 2015, Southwestern had net income of P22,000 and paid a
cash dividend of P7,000. Applying the cost method would give a debit balance in the
Investment in Stock of Southwestern Company account at the end of 2015 of:
A. 33
335,
5,00
0000
B. 333,50
5000
 C. 313,70
700
0
D. 32
320,
0,00
000
0
(Advanced Accounting Part 1, 2012 ed. By Baysa/Lupisan)

180. Whi hich

ch of the fololllowing items will no nott affect the acquiuissition ye
yeaar’s cons
nso
olida
datted net
income in a business combination?
A. Sto
Stock
ck iss
issuan
uancece cos
costt
B. Direc
Directt cost
cost of busine
businessss combin
combination
ation
C. Gai
Gainn or bar
bargai
gain n purch
purchase
ase
D. Am
Amororti
tiza
zattio
ion
n of didifffe
fere
renc
ncee be
betw
twee
een
n fa
fair
ir va
valu
luee an
and
d ca
carrry
ryiing am
amouount
nt of ne
nett as
assset
etss
of acquire
(CPAR Special Handouts 2017)
(Items #181-190, not aligned with the topic assigned)

181. The instal

installment
lment method of recogniz
recognizing
ing profit
profit for account
accounting
ing purpose
purposess is accepta
acceptable
ble if
if
A. Colle
Collections
ctions in
in the year of sale do not exceed
exceed 30% of the total
total sales price.
price.
B. An unreali
unrealized
zed profit
profit account is credit
credited.
ed.
C. Colle
Collection
ction of the
the sales price is not reasonably
reasonably assured.
assured.
D. The method
method is consistentl
consistently
y used for all sales
sales of similar
similar merchandis
merchandise.e.
(Punzalan 2016)

182.
182. Under th
Under thee ins
insta
tall
llme
ment nt sa
sale
less met
methohod,
d,
A. Re
Reve
venunue,
e, co
coststs,
s, an
andd gr
gros
osss pr
prof
ofit
it ar
aree rec
ecog
ogni
nizezed
d pr
prop
opor
orti
tion
onat
atel
ely
y to th
thee ca
cassh th
that
at is
received from the sale of the product.
B. Gross profit is deferred proportionately to cash uncollected from sale of the
 product, but total revenue and costs are recognized at the point of sale.
C. Gross prof ofiit is no
nott rec
ecoogninizzed until the amount of cas ash
h rec
eceeived exceceeeds the cos
ostt
of the item sold.
D. Re
Reve
venunues
es an
and d co
cossts ar
aree rec
ecog
ogni
nize
zed
d pr
prop
opor
orttio
iona
nattel
ely
y to th
thee ca
cash
sh rec
ecei
eive
vedd fro
rom
m th
thee
sale of the product, but gross profit is deferred until all cash c ash is received.
(Punzalan 2016)

183..
183 Under the
Under the cost
cost rec
recove
overy
ry meth
methodod of
of reven
revenue
ue reco
recogni
gnitio
tion,
n,
A. Income is recogniz
recognized
ed on a proportionate
proportionate basis
basis as cash is received
received on the product
product
B. Income is recognized when the cash received from the sale of the product is
greater than the cost of the cost
co st
C. Income is recognized
recognized immedi
immediately
ately sale
sale of the
the product.
product.
D. No
None
ne of th
thes
ese.
e.
(Punzalan 2016)
184.
184. Ch Chri
riss Co
Co.. se
sellls eq
equi
uipm
pmenentt on in
inst
stal
allm
lmen
entt co
cont
ntrrac
actts. Whi
hich
ch of the fol
olllow
owiing sta
tattem
emen
ents
ts
 best justifies Chris, use of the cost recovery method of revenue recognition to account for 
these installment sales?
A. The sales contract provides that title to the equipment passes to the buyer only
when all payments have been made.
B. No cash payment
paymentss are duedue until one year from the the date of
of sale.
sale.
C. Sales are subject
subject to a high
high rate
rate of return
return..
D. There is no reasonabl
reasonablee basis for estimat
estimating
ing collectabil
collectability
ity
(Punzalan 2016)

185..
185 Which of the
Which the followi
following
ng are recog
recogniz
nized
ed each peri
period
od under
under the cost
cost recov
recovery
ery metho
method?
d?
A. Co
Cost
stss on
only
ly
B. Re
Reve
venu nues
es onl
only
y
C. Bot
Bothh costs
costs and rev
revenue
enuess
D. No
None
ne ofof the
these
se

(Punzalan 2016)

186. Leop opaard Co. uses the ins nsttallment sales method to recogn gniize reve
ven
nue. Custom
omererss pay
thee in
th inssta
tall
llme
ment
nt no
note
tess in 24 eq
equa
uall mon
ontthl
hly
y am
amou
ount
nts,
s, wh
whic
ich
h in
incl
clud
udee 12
12%
% int
nter
eres
estt. Wha
hatt is
the balance of an installment note receivable 6 months after the sale?
A. 75% of the the origin
originalal sales
sales price.
price.
B. Less than 75%75% of the original
original sales price
C. The value of of the remaining
remaining monthly
monthly payments
payments discou
discounted
nted at 12%
D. Less than
than the present
present value of the remaining
remaining monthly
monthly pay discount
discounted
ed at 12%.
(Punzalan 2016)

187. On January 2, 2016, Colt Co. sold land that cost P600,000 for P800,000, receiving a
note bearing interest at 10%. The note will be paid in three annual installments of  
P321,700 starting on December 31, 2016. Because collection of the note is very
uncertain, Colt will use the cost recovery method. How much revenue from this sale
should Colt recognize in 2016?
A. 0
B. 6,000
C. 8,000
D. 20,000
(Punzalan 2016)
188. The following information pertains to a sale of real estate by South Co, to Nord. Co.
on December 31, 2016:
Carrying amount 4,000,000
Sales price:
Cash 600,000
Purc
Pu rcha
hase
se mo
mone
ney
y mo
mort
rtga
gage
ge 5,40
5,400,
0,00
000
0

The mo
The morrtg
tgag
agee is pa
payayabl
blee in ni
nine
ne an
annu
nual
al ins
nsttal
allm
lmen
ents
ts of P6
P600
00,0
,000
00 bebegi
ginn
nnin
ing
g Dec
ecem
embe
ber 
r 
31, 2017, plus interest of 10%. The December 31, 2017 installment was paid as
sched
edu
uled, tog
ogeether with inter ereest of P5
P5440,00
000 0. Sou
outth uses the co
cosst rec
eco
over
ery
y met
eth
hod to
acccoun
ac untt for the sal
alee. What amamouounnt of inco
comme shohou
uld South reco
cog
gnize in 20
20117 from the
real estate sale and its financing?
A. 1,1,14
140,
0,00
000
0
B. 740,000000
C. 540,000000
D. 0
(Punzalan 2016)

189..
189 The books
books of
of Paiyak
Paiyakan
an Company
Company show
show the
the ff.
ff. balance
balancess on Decemb
December er 31,
31, 2016:
2016:
Accounts receivable 313,750
Deferred gross profit (before adjustment) 38 , 00 0
Sales
2016 10,000
2017 15,000
Cost of sales
2016 8,000
2017 9,000
Cash collections: 20 16 20 17
On 2016 sales 7,000 3,000
On 2017 sales 12,000

If the cost recove

verry method is used
ed,, wha
hatt amoun
untt would Pitt report as gross profit from
sales to these customers for the year ended March 31, 2017?
A. 2,000
B. 3,000
C. 5,000
D. 15,000
(Punzalan 2016)
190. On January 1, 2016, Rex Co. sold a used machine to Lake, Inc. for P525,000. On this
date
da te,, th
thee ma
mach
chininee ha
had
d a de
deprprec
ecia
iate
ted
d co
cost
st of P3
P367
67,5
,500
00.. La
Lake
ke pa
paid
id P7
P75,
5,00
0000 ca
cash
sh on JaJanu
nuar
aryy
1, 2016 and signed a P45 0,000 note bearing interest at 10%. The note was payable in
three an annnual installment ntss of P150, 0,0000 beginning Janua uarry 1, 2017. Rex ap app
propriately
acco
ac coununtted fo
forr th
thee sal
alee un
unde
derr th
thee ins
nsttal
allm
lmen
entt me
meth
thod
od La
Lake
ke ma
made
de a ti
time
mely
ly pa
paym
ymenentt of fi
firs
rstt
inst
instal
allmlmen
entt on Ja
Janu
nuar
aryy 1, 20
2017
17 of P1P19595,0
,000
00,, wh
whic
ichh in
incl
clud
uded
ed in
inte
tere
rest
st of P4
P45,
5,00
0000 to da
date
te of 
 payment. At December 31, 2017, Rex had deferred gross profit of
A. 10 105,
5,00
000 0
B. 90,000
C. 99,000
D. 76,500
(Punzalan 2016)

191. Builder
ders Construction Corp. signed a con contract to bui
build a five-level
vel apart
artment over
ver a
 period of two years, and with this contract also signed a maintenance contract for five
yea
years. Both con
contracts
cts are negot
gotiable as a single packa
ckage and are closely related to each
other. The two contracts should be
A. Combined
Combined and treated
treated as a single
single contract
contract
B. Segmented
Segmented and consid
considered
ered as two separate
separate contracts
contracts
C. Recognized
Recognized under
under the
the completed
completed contract
contract method
method
D. Treate
ated dif
differently. The building underder the completed contontract method and the
maintenance contract under the percentage of completion method
(Punzalan, 2016)

192. The measurement of contract revenue is affected by a variety of uncertainties that

depend on the outcome of future events. Which statement is incorrect?
A. Contractor and a customer may agree on variations and claims that increase or 
decrease contract revenue subsequently
B. The amount of reve
evenue agreed in a fixed price contract
act may incr
ncreas
ease as a result of 
cost escalation clause
C. The amou
amounnt of revenu
enue may increase as a resu
esult of pen
penalties ari
arising from dela
elays
caused by the contractor in the completion of the contract
D. When a fixed price contract involves a fixed price per unit of output, contract
revenue increases as the number of units is increased.
(Punzalan, 2016)

193. A company used the percentage of completion method of accounting for a 4-year 
construction contract. Which of the following items should be used to calculate the
income recognized in the second year?
 Inco
Income
me prev
previo
ious
usly
ly reco
recogn
gniz
ized
ed Coll
Collec
ecti
tion
on on prog
progre
ress
ss bill
billin
ings
gs
A. Yes Y es
B. No Yes
C. Y es No
D. No No
(Punzalan, 2016)

194. A company used the percentage of completion method of accounting for a 4-year 
construction contract. Which of the following items should be used to calculate the
income recognized in the First year?
Progress Billings Collection on progress billings
A. Yes Y es
B. Y es No
C. No No
D. No Yes
(Punzalan 2016)

195. In accounting for a long-term construction contract using the percentage of  

completion method, the progress billings on contract account is
A. Contra
Contra curre
currentnt asset
asset accoun
accountt
B. Contra
Contra non-c
non-currurrent
ent asset
asset accou
account
nt
C. Noncur
Noncurren
rentt liabil
liability
ity accoun
accountt
D. Reve
Revenue
nue accou
account nt
(Punzalan 2016)

196. High Rise Corp. has entered into a very profitable fixed-price contract for  
cons
constr
truc
ucti
ting
ng a cond
condom
omininiium buil
buildi
ding
ng over
over a per
period
iod of thr
three year
years,
s, wit
with tot
total est
estimat
imated
ed
cos
cost of P18M
P18M.. It incu
incurrs the
the follo
ollowi
wing
ng cost
costss relat
elatiing to the cont
contra
ract
ct duri
during
ng the first
irst year
year of 
construction:

Materials P 2.5M
Site Labor costs 2.0M
Agreed administration costs as per 1.0M
contracts to be reimbursed by the
customer
Depreciation of the plant used for the 500K 
construction
Marketing costs for selling condo units 1.0M
when they are ready for occupancy
 A. 33 ⅓%
B. 27%
C. 25%
D. 39%
(Punzalan 2016)

197. The followi

following
ng data
data pertai
pertains
ns to
to Pell
Pell Co.’s
Co.’s construction
construction Jobs, which commenced
commenced during
during
2016:

PROJECT 1 PROJECT 2
Contract price P 4 2 0 ,0 0 0 P 3 0 0 ,0 0 0
Cost incurred during 2016 240,000 280,000
Estimated cost to complete 120,000 40,000
Billed to customers during 2016 150,000 270,000
received from customers during 2016 90,000 250,000

If Pell used the percentage of

o f completion method, what amount of gross profit (loss)
would Pell report in it’s 2016 income statement?
A. (20,0
20,000
00))
B. 20,000
C. 22,500
D. 40,000
(Punzalan 2016)

For Items #198-200, use the following information:

Atla
Atlass Const
Constru
ruct
ctio
ion
n Co.
Co. Has
Has used
used the
the cost-
cost-to
to-c
-cos
ostt perc
percent
entage
age meth
method
od of reco
recogni
gnizi
zing
ng reven
revenue.
ue. Th
Thee
following incomplete records we’re provided for a recently completed building project

198.
198. How
How muc
muchh cos
costt was
was incu
incurr
rred
ed in 201
2016?
6?
A. 18,4
18,400
00,0
,000
00
B. 11,8
11,800
00,0
,000
00
C. 6,60
6,600,
0,00
0000
D. 1,60
1,600,
0,00
0000
199..
199 What
What percen
percentag
tagee (round
(rounded)
ed) ofthe
ofthe proj
project
ect was
was compl
complete
eted
d by the
the end of 2016?
2016?
A. 55%
B. 60%
C. 65%
D. 70%

200..
200 What
What is the
the estim
estimated
ated cost
cost to comp
complet
letee the proj
project
ect at
at the
the end of
of 2016
2016
A. 3,06
3,060,
0,00
000
0
B. 6,80
6,800,
0,00
000
0
C. 8,20
8,200,
0,00
000
0
D. 9,80
9,800,
0,00
000
0

201. Deb Co. records all sales using the installment method of accounting. Installment
sales con
contracts
cts call for 36 equ
equal monthly cash
ash pay
payments. The amount of deferred gross
 profit relating to collections 12 months beyond the balance sheet date should be reported
in the
A. Current
Current liabilit
liability
y section
section as a deferre
deferred
d revenue.
revenue.
B. Noncurrent
Noncurrent liabil
liability
ity section
section as a deferred
deferred revenue.
revenue.
C. Current
Current asset
asset section
section as a contra
contra account.
account.
D. Noncurrent
Noncurrent asset
asset section
section as
as a contra
contra account.
account.
(AICPA, Adapted)

202..
202 The Hogbe
Hogbeanan Co. is a const
construc
ructio
tion
n company
company that
that has the
the ff.
ff. costs
costs on its cont
contrac
racts:
ts:
1. Proj
Project
ect mana
managerger’s
’s cos
costs
ts
2. Destru
Destructi
ction
on of an exist
existing
ing buil
buildin
ding
g
3. Restor
Restorati
ation
on of an old factor
factoryy
According to AIS 11 (Construction Contracts) which costs may be included within
contract costs?
A. Cost
Cost (1) and cost
cost (2)
(2) only
only
B. Cost
Cost (1)
(1) and
and cost
cost (3)
(3) only
only
C. Cost
Cost (2)
(2) and
and cost
cost (3)
(3) only
only
D. Cost
Cost (1),
(1), (2) and (3)
(Punzalan, 2015)

203. According to AIS 11, Construction Contracts, which of the following projects
undertaken by an entity should be accounted for as a construction contract?
A. An item of plant
plant and machinery
machinery being construc
constructed
ted to be sold as inventory
inventory..
B. An office
office block being
being construct
constructed
ed as investment
investment propert
property.
y.
 C. A warehouse
warehouse being
being construct
constructed
ed for the entity’s
entity’s own
own use.
D. A large boat being constructed for a third party under a specifically negotiated
contract.
(Punzalan, 2015)

204.
204. In acco
accoun
unti
ting
ng for long-
ong-te term
rm cons
consttruct
ructiion cont
contra
ract
ct suing
uing the
the perc
percen
enta
tage
ge of comp
complletio
etion
n
method, the progress billings on contra account is a
A. contra
contra curre
currentnt asset
asset account
account..
B. contra
contra non-cu
non-currerrent
nt asset
asset account
account..
C. non
noncur
curren
rentt liabili
liability
ty account
account..
D. reven
revenue
ue acc
accoun
ount.
t.
(Punzalan, 2015)

205. The calcalculat

ulatiion of the incom
come recog
cognized in the third year of a five-y
e-year
ear con
construction
contract accounted for using the percentage-of-completion method includes the ratio of
A. Total costs
costs incurred
incurred to
to date to total
total estimate
estimated d costs.
costs.
B. Total costs incurred
incurred to date
date to total
total billing
billingss to date.
date.
C. Costs incurred
incurred in year
year 3 to total
total estimat
estimateded costs.
costs.
D. Costs incurred
incurred in year 3 to
to total billin
billings
gs to date.
date.
(Punzalan, 2015)
(Items #206-208, not aligned with the topic assigned)

206. Roco Corp., which began business on January 1, 2008, appropriately uses the
inst
instal
allm
lmen
entt sa
sale
less me
meth
thod
od of ac
acco
coun
unti
ting
ng fo
forr in
inco
come
me ta
tax
x re
repo
port
rtin
ing
g pu
purp
rpos
oses
es.. Th
Thee fo
foll
llow
owin
ing
g
data are available for 2008:
Installment accounts receivable, 12/31/08 P200,000
Installment sales for 2008 P350,000
Gross profit on sales 40%
Under the installment sales method, what would Roco’s deferred gross profit at
December 31, 2008?
A. P2
P20,
0,00
0000
B. P90,00
0000
C. P80,00
0000
D. P6
P60,
0,00
0000
(Punzalan, 2015)

207. Long Co., which began operations on January 1, 2008, appropriately uses the
inst
instal
allm
lmen
entt sal
ales
es met
etho
hodd of ac
acco
coun
unti
ting
ng.. Th
Thee fol
ollo
lowi
wing
ng in
info
forrma
mati
tion
on pe
perrta
taiins to Lo
Long
ng’’s
operations for the year 2008:
 Installment sales P1,000,000
Regular sales 600,000
Cost of installment sales 500,000
Cost of regular sales 300,000
General and administrative expenses 100,000
Collections on installment sales 200,000
What is the net income on December 31, 2008?
A. P4P400
00,0
,000
00
B. P2P200
00,0
,000
00
C. P3P300
00,0
,000
00
D. P1P100
00,0
,000
00
(Punzalan, 2015)

208. A refrigerator was sold to Fernanda Castro for P16, 000, which included a 40%
markup on selling price. She made a down payment of 20%, payment of four of the
remaining 16 equal paym ymenentt and dedeffau
aullted on further payments. The refefrriger
eraator was
repo
repossses
esssed
ed,, at wh
whic
ich
h tim
imee the fa
fair
ir va
valu
luee wa
wass de
dete
term
rmin
ined
ed to be P6
P6,8
,800
00.. Th
Thee rep
epos
osse
sesssi
sion
on
resulted to the following (loss) gain:
A. P(
P(1,
1,04
040)0)
B. P1,040
C. P4,056
D. P2,960
(Punzalan, 2015)

209.
209. Hans
Hansenen Cons
Constr
truc
ucti
tion
on,, Inc,
Inc, has
has cons
consis
iste
tent
ntly
ly used
used the
the perc
percen
enta
tage
ge-o
-of-
f-co
comp
mpleleti
tion
on meth
method
od
of reco
recogn
gniizing
zing incom
ncome. e. Duri
Duringng 2008
2008,, Hans
Hansenen star
tarted
ted work
work on a P3,0
P3,000
00,0
,000
00 fixed
ixed--pri
price
cons
constr
truc
ucti
tion
on cont
contrract
act. Th
Thee acco
accoun
untting
ing recor
ecords
ds dis
disclos
closed
ed the
the foll
follow
owining
g dat
data for the
the year 
year 
ended December 31, 2008:
Costs incurred P930,000
Estimated cost to complete 2,170,000
Progress billings 1,100,000
Collections 700,000

How much loss should Hansen have recognized in 2008?

A. P230
P230,0
,000
00
B. P100
P100,0
,000
00
C. P30,000
000
D. P0
(Punzalan, 2015)
210.
210. Th
Thee Robe
Roberrt Cons
Consttruct
ructiion Corp
Corpor
orat
atio
ion
n uses
uses the
the per
percent
centag
age-
e-of
of-c
-com
omplplet
etiion met
method
hod of 
acco
accoun
untting.
ing. In 2008
2008,, Robe
Roberrt bega
began
n to wor
work on a cont
contrract
act it had
had recei
eceive
ved
d whic
whichh prov
provid
ided
ed a
contract price of P8,000,000. Other details follow:
Costs incurred during the year P1,200,000
Estimated cost to complete as of December 31 4,800,000
Billings during the year 1,440,000
Collections during the year 1,000,000
What should be the gross profit recognized in 2008?
A. P160
P160,0
,000
00
B. P240
P240,0
,000
00
C. P400
P400,0
,000
00
D. P1,6
P1,600
00,0
,000
00
(Punzalan, 2015)

211. According
According to
to IAS 11, which
which of
of the
the followin
followingg projects
projects undertaken
undertaken byby an entity
entity should
should
 be accounted for as a construction contract?
A. An item of plant
plant and machinery
machinery being construc
constructed
ted to be sold as inventory
inventory
B. An office
office block being
being construct
constructed
ed as an investment
investment property
property
C. A warehouse
warehouse being
being construct
constructed
ed for the entity’s
entity’s own
own use
D. A large boat being construct
constructed
ed for a third party under a specifical
specifically
ly negotiated
negotiated
contract
(Punzalan, 2016)

212. How should

should the balances
balances of progress
progress billings
billings and
and construc
construction
tion in progress
progress be shown
shown
at reporting dates prior to the completion ofo f a long-term contract?
A. Progress
Progress billings
billings as deferred income,
income, construction
construction in progress
progress as deferred expense
B. Progress
Progress billings
billings as income,
income, constructi
construction
on in progress
progress as inventory
inventory
C. Net, as current
current asset
asset if debit balance
balance and current
current liability
liability if credit
credit balance
balance
D. Net, as income
income from
from construction
construction if
if credit
credit balance,
balance, and loss from construc
construction
tion is
debit balance
(Punzalan, 2016)

213. The percenta

percentage
ge of completion
completion of a construct
construction
ion contrac
contractt is based of the
the ff.
ff. except:
except:
A. The proportion
proportion that contract
contract costs
costs incurred
incurred for work performed
performed to date bear to the
estimated total contract costs
B. Survey
Survey of work
work perfor
performed
med
C. Completion
Completion of a physical
physical proporti
proportion
on of the
the contract
contract work
work
D. Progress
Progress payments
payments and advances
advances received
received from
from customers
customers
 (Punzalan, 2016)
For Items #214-217, use the following information:
Sin Construction Co. has used the cost-to-cost percentage-of-completion method of recognizing
revenue, Marc Sin assumed the presidency of the company after the death of his father, Vincent.
In reviewing the records, Marc finds the following information regarding a recently completed
 building project for which the total contract was P2,000,000

2011 2012 2013

Gross profit (loss) P40,000 P140,000 P(20,000)
Cost incurred each year 360,000 ? 820,000
Marc wants to know how effectively the company operated during the three (3) years on this
 project and, since the information is not complete, has asked for answers to the following
questions:

214.
214. How
How muc
muchh cos
costt was
was incu
incurr
rred
ed in 201
2012
2
A. P660
P660,0
,000
00
B. P600
P600,0
,000
00
C. P560
P560,0
,000
00
D. P500
P500,0
,000
00

215..
215 What
What perce
percenta
ntage
ge of the proj
project
ect was comple
completed
ted by the
the end
end of 2012
2012
A. 65%
B. 60%
C. 55%
D. 79%

216..
216 What
What was
was the
the total
total estima
estimated
ted gross
gross profit
profit on the
the proje
project
ct by
by the
the end of 2012
2012
A. P300
P300,0
,000
00
B. P180
P180,0
,000
00
C. P250
P250,0
,000
00
D. P350
P350,0
,000
00

217..
217 What
What was the esti
estimat
mated
ed cost
cost to
to comple
complete
te the
the projec
projectt at the
the end
end of 2012?
2012?
A. P660
P660,0
,000
00
B. P500
P500,0
,000
00
C. P650
P650,0
,000
00
D. P680
P680,0
,000
00
(Guerrero, 2013)
218. The Tamiya Builders was recently awarded a P2,800,000 contract to construct a
shopping mall for Rustan Inc. Tamiya Builders estimates it will take 42 months to
comp
comple
lete
te the
the cont
contra
ract
ct.. Th
Thee comp
compan
any
y uses
uses the
the cost
cost-t
-to-
o-co
cost
st meth
method
od to esti
estima
mate
te prof
profit
its.
s. Th
Thee
following data are available for the year 2010 to 2013

Year Actual cost each year Estimated cost to complete

2010 P1,300,000 P1,360,000
201 660,000 780,000
2012 480,000 380,000
2013 340,000 -0-

How much is the realized gross profit (loss) in 2012

A. P(20
P(20,0
,000
00))
B. P(62
P(62,9
,918
18))
C. P22,918
918
D. P(22
P(22,9
,918
18))
(Guerrero, 2013)

219. The followi

following
ng data
data pertains
pertains to Havianas
Havianas Builders,
Builders, Inc. which uses the percent
percentage
age of
completion method
Project A Project B Project C Project D
Contract Price P2,900,000 P3,400,000 P1,700,000 P2,000,000
Cost incurred,2012 1,680,000 1,440,000 320,000 -0-
Estimated cost to 1,120,00 1,760,000 960,000 -0-
complete,2012
Cost incurred, 2013 960,000 680,000 863,000 560,000
Estimated cost to -0- 1,360,000 117,000 1,040,000
complete,2013

How much is the net income for the year ended 2012 and 2013:
A. P135,
P135,00
000;
0; 309,0
309,000
00
B. P135,
P135,00
000;
0; 489,0
489,000
00
C. P195,
P195,00
000;
0; 429,0
429,000
00
D. P369,
P369,00
000;
0; 135,0
135,000
00
(Guerrero, 2013)

220. Joys Construction Company has used the cost-cost method of computing the
 percentage of completion to recognize revenue. Total contract price was P10,000,000.
The following data are available from 2011 to 2013:
 2011 2012 2013

Realized gross profit (loss), P 200,000 P 700,000 P (100,000)

current year

Cost incurred each year 1,800,000 ? 4,100,000

How much is the total estimated gross profit on the project by the end of 2012?
2 012?
A. P 1,7
1,750
50,0,000
00
B. P2,2
P2,250
50,0
,000
00
C. P1,5
P1,500
00,0
,000
00
D. P1,1
P1,166
66,6
,667
67
(Guerrero, 2013)

221.
221. Unde
Underr IAS 11,
11, Cons
Consttruct
ructiion Cont
Contra
ract
ctss, when
hen it is prob
probab
able
le that
that total
otal cont
contra
ract
ct cost
costss on
a fixed price contract will exceed total contract revenue, the expected loss should be
A. Set off against
against profits
profits on other
other contracts
contracts whereby
whereby available.
available.
B. Recognized
Recognized as expense immedia
immediately,
tely, unless
unless revenue
revenue to date exceed costs
costs to date.
C. Apportioned
Apportioned to the years
years of contract
contract according
according to the stage of completi
completion
on method.
D. Recognized
Recognized asas an expense
expense immediat
immediately.ely.
(Punzalan, 2016)

222. A building contr ntractor has a con

contract to consonstruct
uct a larg
arge buil
uilding. It is estimated that
the building will take 2 yea
years to com
ompl pleete. Progress
ess billings will be sent to the customer 
at quar
quarte
terl
rly
y inter
nterva
vals
ls.. Whic
Which h of the
the follo
ollowi
wing
ng des
descri
cribes
bes the
the pref
prefererab
able
le poin
pointt for reven
evenue
ue
recognition for this contract?
A. After
After the
the contrac
contractt is signed
signed..
B. As progress
progress is made
made toward
toward completion
completion ofof the contract
contract..
C. As cas
cash
h is recei
received
ved..
D. When
When the contra
contractct is compl
complete
eted.
d.
(Punzalan, 2016)

223. Contract
Contract costs
costs of a construc
construction
tion contract
contract compri
comprisese all
all of
of the
the follow
following,
ing, except
A. Costs that directly
directly relate
relate to the
the specific
specific contract.
contract.
B. Costs that are att
attributable to cont
ontract acti
ctivity in gen
general and can be alloca
ocated to
the contract.
C. Such other
her costs that areare spec
pecifically char
hargeab
eable to the customer under the terms
of the contract.
 D. General administration costs for which reimbursement is not specified in the
contract.
(Punzalan, 2016
 )
224. The palace Co., a construction company, has December 31 year end. It is to build a
factory for a client and has scheduled its work as follows:

March 20, 2016 Contract to be awarded and signed.

April 25, 2016 Construction work to commence.
 November 27, 2016 Principal construction work to be completed.
December 30, 2016 Final completion of contract.

In acco
accord
rdan
ance
ce with
with IAS
IAS 11,
11, Cons
Constr
truc
ucti
tion
on Cont
Contra
ract
cts,
s, the
the maxi
maximu
mumm expe
expect
cted
ed peri
period
od over 
over 
which the costs attributable to the contract should accumulated is
A. March
March 20, 2016
2016 to Decem
December
ber 30,
30, 2016
B. April
April 25,
25, 2016 toto Novembe
Novemberr 27, 2016
2016
C. April
April 25,
25, 2016 toto Decembe
Decemberr 30, 2016
2016
D. March
March 20, 2016
2016 to Novem
Novemberber 27,
27, 2016
(Punzalan, 2016)

225. The percentage of completion method that may be used to account for construction
contracts can be justified on the basis that:
A. The contractor
contractor will be continuous
continuouslyly working and therefore
therefore earning
earning revenue.
revenue.
B. In most long-term construction projects, payments are made periodically
throughout the life of the contract allowing revenue to be recognized.
C. It is unre
unreas
ason
onab
ablle to expe
expect
ct a cont
contrract
actor to reco
record
rd reven
evenue
ue only
only when
when cons
constr
truc
ucttion
ion
is completed.
D. The con
contracti
cting firm has a basiasis for measu
asuring completion at particular inte
nterim
dates.
(Punzalan, 2016)

226..
226 The Thing
Thing Co.
Co. has just
just complet
completed
ed a 4-year
4-year contra
contract
ct to which
which the
the follow
following
ing relat
relate:
e:
Labor and material costs 1,800,000
Machinery cost 600,000
Initial design cost 100,000
Disposal proceeds of machinery 50,000

What are the total contract costs, according to IAS 11, Construction Contracts?
 A. 2,35
2,350,
0,00
000
0
B. 1,90
1,900,
0,00
000
0
C. 2,45
2,450,
0,00
000
0
D. 2,50
2,500,
0,00
000
0
(Punzalan, 2016)

227. C & J Construction, Inc. consistently used the percentage of completion method of 
reco
recogn
gniz
izin
ing
g inco
income
me.. Last
Last year
year C & J star
starte
ted
d work
work on a P4,5
P4,500
00,0
,000
00 cons
constr
truc
ucti
tion
on cont
contra
ract
ct,,
whic
which h was
was comp
complelete
ted
d this
his year
year.. Th
Thee acco
accoun
untting
ing recor
ecords
ds disc
disclo
lossed the
the fol
followi
lowingng data
data for 
last year:
Progress billings P1,650,000
Cost incurred 1,350,000
Collections 1,050,000
Estimated cost to complete 2,700,000
How much revenue should C & J recognize on this contract last year
A. 105,
105,00
0000
B. 150,000
000
C. 300,000
000
D. 350,
350,00
0000
(Punzalan, 2016)

228. Mill Construction Co. uses the percentage of completion method of accounting.
Duri
During
ng 2016
2016,, Mill
Mill cont
contrract
acted to buil
build
d an apar
aparttment
ment comp
complelex
x for Drew
rew for P20,
P20,00
000,
0,00
000.
0.
Mill estimated that total costs would amount to P16,000,000 over the period of  
cons
constr
truc
ucti
tion
on.. In conn
connec
ecti
tion
on with
with this
this cont
contra
ract
ct,, Mill
Mill incu
incurr
rred
ed P2,0
P2,000
00,0
,000
00 of cons
constr
truc
ucti
tion
on
cost
cost duri
during
ng 2016
2016.. Mill
Mill bill
billed
ed and
and coll
collec
ecte
ted
d P3,0
P3,00000,0
,000
00 from
from Drew
Drew in 2016
2016.. What
What amou
amount nt
should Mill recognize as gross profit for 2016?
A. 250,
250,00
000 0
B. 375,000000
C. 500,000000
D. 600,
600,00
000 0
(Punzalan, 2016)

229. The Tiger Co. has entered into a 5-year fixed price construction contract to build a
fact
factor
ory.
y. Th
Thee cont
contrract
act valu
valuee is P20,
P20,00
000,
0,00
000
0 and
and the est
estimat
imated
ed cost
costss are
are P16,
P16,00
000,
0,00
000.
0. At
the end of the first year, Tiger can estimate the outcome of the contract reliably. It has
rece
receiived
ved cas
cash paym
paymenents
ts to the
the valu
valuee of P8,6
P8,600
00,0
,000
00 and
and incu
incurr
rred
ed cos
costs of P6,0
P6,000
00,0
,000
00.. At
 the end of the first year, what amount should be recognized as revenue in the financial
statements, according to IAS 11, Construction Contracts?
A. 3,20
3,200,
0,00
000
0
B. 7,50
7,500,
0,00
000
0
C. 6,00
6,000,
0,00
000
0
D. 8,60
8,600,
0,00
000
0
(Punzalan, 2016)

230. Build-It Corp. is constructing a building and has signed a fixed-price two-year  
cont
contrract
act for P21
P21 mill
millio
ion.
n. It has
has incu
incurr
rred
ed the
the fol
followi
lowing
ng cos
cost relat
elatiing to the cont
contra
ract
ct by the
the
end of first year:
Materials P 5.0 million
Labor 2.0 million
Construction overhead 2.0 million
Marketing 0.5 million
Depreciation of idle plant and equipment 0.5 million

At the end of Year-1, it has est

estimated cost to com
complete
ete the contract
act at P9 million. What
hat
 profit or loss from the contract should Build-It recognize
recognize at the end of Year-1?
A. 1.5
1.5 mil
milli
lion
on
B. 1.0
1.0 mill
millio
ion
n
C. 1.05
1.05 mill
millio
ionn
D. 1.28
1.28 mill
millio
ion
n
(Punzalan, 2016)

231.
231. POC
POC Comp
Companany
y acco
accoun
unts
ts for
for a long
long-t
-ter
erm
m cons
constr
truc
ucti
tion
on cont
contra
ract
ct usin
using
g the
the perc
percen
enta
tage
ge-o
-of 
f 
com
completi
etion method. As of the endend of the curr
urrent fiscal yea
year, the followi
owing inform
ormation
was available regarding a project expected to be completed in the following year:

Cumulative progress billings $400,000

Cumulative costs incurred 300,000
Cumulative revenues recognized 80,000

The diff
The differ
eren
ence
ce betw
betweeeenn cons
constr
truc
ucti
tion
on in prog
progre
ress
ss and
and prog
progre
ress
ss bill
billin
ings
gs shou
should
ld be repo
report
rted
ed
in the statement of financial position for the current
cu rrent year as
A. A curren
currentt asset
asset of $20,000
$20,000..
B. A curren
currentt liabil
liability
ity of
of $20,00
$20,000.0.
C. Unearn
Unearneded revenu
revenuee of $100,
$100,000.
000.
D. A separate
separate component
component of sharehol
shareholders’
ders’ equity
equity of $100,000
$100,000
 (RPCPA
2016)

232..
232 The ratio
rational
nalee for adopti
adoption
on of the percen
percentag
tage-o
e-of-c
f-comp
omplet
letion
ion metho
method
d is that:
that:
A. Result
Resultss are more conser
conservat
vative
ive..
B. It provides
provides a measure
measure of periodic
periodic accompli
accomplishment
shment..
C. It is
is a better
better match
match with
with legal
legal ownershi
ownership.
p.
D. It resu
results
lts in
in a lower
lower income
income tax
tax
(RPCPA
2016)

233. How should earned but unbilled revenues at the balance sheet date on a long-term
cons
constr
truc
ucti
tion
on cont
contrract
act be disc
discllosed
osed if the perc
percen
enta
tage
ge--of-
of-com
complet
pletiion metho
ethod
d of reven
evenueue
recognition is used?
A. In a footnote to the financial
financial statement
statementss until the customer
customer is formally
formally billed
billed for
the portion of the work completed.
B. As a receivable
receivable in the
the noncurrent
noncurrent asset
asset section
section of the balance
balance sheet.
sheet.
C. As a constructio
constructionn in progress
progress in the noncurrent
noncurrent asset
asset section
section of the balance
balance sheet.
D. As constructi
construction
on in progress
progress in the current
current asset section
section of the
the balance sheet
sheet

(RPCPA
2016)

234. In accounting for a long-term construction-type contract using the

 percentage-of-completion method, the gross profit recognized during the first year would
 be the estimated total gross profit from the contract, multiplied by the percentage of the
costs incurred during the year to the
A. Total
Total costs
costs incur
incurred
red to date
date..
B. Unbilled
Unbilled portio
portionn of the contrac
contractt price.
price.
C. To
Tota
tall estim
estimat
ated
ed cost
cost
D. Total
Total contrac
contractt price
price
(RPCPA
2016)

235. If a company uses the completed-contract method of accounting for long-term

con
construct
uction con
contracts, then dur
during the period of construction,
on, financ
ancial info
nformati
ation
related to a long-term contract will
A. Appear on both
both the income statement
statement and
and balance sheet
sheet during the
the construction
construction
 period
 B. Appear only
only on the income
income statement
statement during the
the period
period of constructi
construction.
on.
C. Appear only
only on the balance
balance sheet
sheet during
during the period
period of construct
construction
ion
D. Not appear on the
the financial
financial statements
statements
(RPCPA
2016)

236. In accounting for a long-term construction contract for which there is a projected
 profit, the balance in the Construction in Progress account at the end of the first year of 
work using the percentage-of-completion method would be
A. zero.
B. The same
same as
as the completed-co
completed-contract
ntract method.
method.
C. Higher than the completed-co
completed-contract
ntract method
D. Lower than the the completed-
completed-contra
contract
ct method
method
(RPCPA
2016)

For Items #237-238, use the following information:

Moon View Desert Homes constructed a subdivision of upscale homes north of Cave Creek,
Arizona, during 2003 and 2004 under contract with Empire Development. Relevant data are
summarized below:
Contract Amount $2,000,000
2003 2004
Cost 800,000 600,000
Gross Profit 350,000 250,000
Contract Billings 1,000,000 1,000,000

237. Moon View uses the percentage-o e-of-com

completi
etion method to recog
cognize revenu
enue. What
would be the journal entry made in 2003 to record revenue?

A. Account
Accountss receiv
receivabl
ablee 1,000,00
1,000,000
0
Revenue from long-term contracts 1,000,000

B. Account
Accountss receiv
receivabl
ablee 1,350,00
1,350,000
0
Gross profit 350,000
Revenue from long-term contracts 1,000,000

C. Constr
Construct
uction
ion in progre
progress
ss 1,150,0
1,150,000
00
Cost of construction 350,000
Revenue from long-term contracts 800,000
 D. Account
Accountss receiv
receivabl
ablee 1,350,00
1,350,000
0
Billings in excess of cost 350,000
Revenue from long-term contracts 1,000,000
(RPCPA
2016)

238..
238 In its
its Decem
December
ber 31,
31, 2003
2003 balan
balance
ce sheet
sheet,, Moon
Moon View
View would
would repor
report:
t:
A. The asset,
asset, cost and
and profits
profits in excess
excess of billing
billingss of $150,000.
$150,000.
B. The liabilit
liability,
y, billings
billings in
in excess
excess of cost
cost of $200,000
$200,000
C. The asset,
asset, contract
contract amount
amount in excess
excess of billings
billings of $1,000,00
$1,000,000.
0.
D. The asset,
asset, deferred
deferred profit
profit of
of $400,000
$400,000
(RPCPA
2016)

239. Under
239. Under the perc
percent
entage
age of compl
completi
etion
on method
method , the
the net income
income to be
be recogni
recognized
zed for
for the
first year of a three-year construction contract is to be determined on the basis of the ratio
of .
A. Estimated
Estimated cost
cost to complete
complete to total
total estimated
estimated costs.
costs.
B. Costs incurred
incurred to date
date to total
total estimate
estimatedd costs
C. Actual costs incurred
incurred to total
total estimat
estimated
ed costs.
costs.
D. Total estimat
estimated
ed costs to estimated
estimated costs
costs to complete
complete
(RPCPA
2016)

240. If the Construction in Progress account has a balance of P1,000,000 while the
Prog
Progre
ress
ss Bill
Billin
ings
gs on Cont
Contra
ract
ctss acco
accoun
unt’
t’ss bala
balanc
ncee is P800
P800,0
,000
00,, how
how shou
should
ld thes
thesee acco
accoun
unts
ts
 be reflected on the balance sheet?
A. Constructi
Construction
on in Progress
Progress will
will be shown as a current
current asset.
asset.
B. Progress
Progress Billings
Billings on Contracts
Contracts will
will be shown as a current
current liability.
liability.
C. The difference
difference between
between the two accounts
accounts will
will be reflected
reflected as a current
current asset.
asset.
D. The difference
difference between
between the two accounts will will be reflected
reflected as a current liability
liability

(RPCPA
2016)

241. Under
241. Under the perc
percent
entage
age of compl
completi
etion
on method
method,, contrac
contractt revenue
revenue for
for the
the period
period is
computed
A. By multiplying
multiplying the percentage-
percentage-of-com
of-completi
pletion
on to the transaction
transaction price.
 B. By dividing
dividing the contract
contract price by the percentage
percentage-of-c
-of-complet
ompletion
ion and deducting
deducting
revenues already recognized in the prior periods.
C. By multiplying
multiplying the percentage-
percentage-of-com
of-completi
pletion
on to the contract price
price and deducting
deducting
revenues already recognized in the prior periods.
D. By multiplying
multiplying the percentage-
percentage-of-com
of-completi
pletion
on to the contract price
price and adding
revenues already recognized in the prior periods.
(Millan, 2016)

242..
242 Under
Under the
the zero-p
zero-prof
rofit
it meth
method,
od, cont
contrac
ractt revenu
revenuee for the peri
period
od is
A. Eq
Equa
uall to zero
zero
B. Equal to the
the costs of constructio
construction
n recognized
recognized during
during the period
period
C. Equal to the contract
contract price
price divided
divided by the estimated
estimated constructio
construction
n period
D. Equal to the costs of construct
construction
ion recognized
recognized during the period
period that are probable
probable
of recovery
(Millan, 2016)

243. A contractor enters into contact with a customer to construct a building. It is

estimated that the building will take 2 years to complete. The entity assesses its
 performance obligation in accordance with the principles in PFRS 15 and concludes that
the perf
erform
ormance obligati ation is satisfied over time. Progrogress bil
billings will be sent to the
cust
custom
omer
er at quar
quarte
terl
rly
y inte
interv
rval
als.
s. Whic
Which h of the
the foll
follow
owin
ing
g desc
descri
ribe
bess the
the pref
prefer
erab
able
le poin
pointt for 
for 
revenue recognition for this contract?
A. After
After the
the contrac
contractt is signed
signed..
B. As progress
progress is is made towards
towards the
the completion
completion of the
the contract.
contract.
C. As cas
cashh is recei
received
ved..
D. When
When the contra
contract ct is compl
complete
eted.
d.
(Millan, 2016)

244. Which of the following does not indicate that a customer can benefit from a good or 
ser
service
vice eith
either
er on its
its own
own or toget
ogethe
herr wit
with othe
otherr res
resour
ources
ces that
hat are
are readi
eadily
ly avai
availlabl
able to the
the
customer?
A. The good or service
service could be used,
used, consumed,
consumed, sold for an amount
amount that is greater
greater
than scrap value, or otherwise held in a way that generates economic benefits.
B. The fact that
that the entity
entity regularly
regularly sells
sells a good or service
service separately.
separately.
C. The fact that
that the entity
entity has no
no alternative
alternative use
use for the good
good or service.
service.
D. All ofof these
these are
are indica
indicator
tors.
s.
(Millan, 2016)
245. An entity’s perf erformance obli
bligation under
der a long
ong-term construction contr
ntract will be
satisfied at a point in time. Revenue is recognized when recorded progress billings
Are collected Exceed recorded costs
A. Yes Yes
Yes
B. No No
C. No Ye s
D. Yes No
No

(Millan, 2016)

246. An entity uses the inputsuts method based on costs incur

curred to measure its progre
gress on a
 performance obligation that is satisfied over time. Which of the following items would
affect the entity’s computation for the revenue to be recognized each year?
Revenue previously recognized Progress billings to date
A. Yes Ye
Yes
B. Yes No
C. No Yes
D. No No
(Millan, 2016)

247. An entity uses the out

output
puts method
hod base
ased on surveys
eys of work perf
erform
ormed to measu
asure its
 progress on a performance obligation that is satisfied over time. Which of the following
items would affect the entity’s computation for the revenue to be recognized each year?
Receivable Collection on Progress billings
A. Yes Yes
Yes
B. Yes No
C. No Yes
D. No No
(Millan, 2016)

248. DJ Builders, Inc. has consistently used the percent-of-completion method of  

accounting for construction-type contracts. During 2015, DJ started work on a
P9,00
P9,000,0
0,000
00 fixed
fixed pric
pricee const
constru
ruct
ctio
ion
n contr
contrac
actt that
that was
was comp
comple
lete
ted
d in 2016.
2016. DJ
DJ’s
’s accou
account
ntin
ing
g
records disclosed the following:

12/31/2015 12/31/2016
Cumulative co
contract costs incurred P3,900,000 P6,300,000
Estimated total costs at completion 7,800,000 8,100,000
 How much income would DJ have recognized on this contract for the year ended
December 31, 2016?
A. P100
P100,0
,000
00
B. P300
P300,0
,000
00
C. P600
P600,0
,000
00
D. P700
P700,0
,000
00
(Dayag, 2015)

249. Uberita Corp. ententere

ered into a con
construct
uction agre
greemen
ementt in 2015 that
hat called for a con
contract
 price of P9,600,000. At the beginning of 2016, a change order increased the initial
cont
contrract
act pri
price by P480
P480,0,000
00.. Th
Thee comp
compan
anyy uses
uses the per
percent
centag
age-
e-of
of--comp
comple
leti
tion
on bas
basis of 
revenue recognition. In relation to the project, the following data are obtained:

20 15 2 0 16
Cost incurred to date P4,920,000 P8,640,000
Est’d costs to complete 4,920,000 2,160,000
Billings made 5,280,000 8,520,000
Collection made 4,380,000 7,500,000

What gross profit (loss) should Uberita Corp. recognize in 2016?

A. P120,00
P120,000 0 gross
gross profit
profit
B. P240,
P240,00
0000 gros
grosss loss
loss
C. P480,
P480,00
0000 gros
grosss loss
loss
D. P720,00
P720,000 0 gross
gross loss
loss
(Dayag, 2015)

250. On September 30, 2016, Jaja Co., Inc. was awarded the contract to build a
1,000-room hotel for P120 million. Among others, the parties agreed to the following:

1. Ten percent
percent mobilizati
mobilizationon fee (deducted
(deducted from
from “final
“final billing”)
billing”) payable
payable within
within ten
days from the signing of the contract;
2. Retention
Retention of ten
ten percent on
on all billings
billings (to
(to be paid with
with the final
final billing,
billing, upon
completion and acceptance of the project); and
3. Progress
Progress billing
billingss are to be paid within
within 2 weeks upon acceptance
acceptance..

By the end of 2016, the company

any had present
ented one progress
ess billing, correspondi
nding to
10%
10% com
complet
pletio
ion,
n, whi
which was
was eval
evalua
uate
ted
d and
and acce
accept
pted
ed by the
the cli
client
ent on Dece
Decemmber
ber 29,
29, 2016
2016
for payment in January of the next year. In 2016, assuming use of the
  percentage-of-completion method of accounting, Jaja Co., Inc. received cash a total fee
of:
A. P1,2
P1,200
00,0
,000
00
B. P11,
P11,80
800,
0,00
000
0
C. P12,
P12,00
000,
0,00
000
0
D. P13,
P13,20
200,
0,00
000
0
(Dayag, 2015)

251. In selecting an accounting method for a newly contracted long-term construction

 project, the principal factor to be considered should be
A. the terms
terms of payment
payment in the
the contract.
contract.
B. the degree to which a reliable estimate of the costs to complete and extent of  
 progress toward completion is practicable.
C. the method commonly used by the contractor to account for other long-term
construction contracts.
D. the inherent
inherent nature of the contractor's
contractor's technical
technical facilities
facilities used in construction.
construction.
(Comprehensive Reviewer, Hilario Tan)

252. The use of the percentage of completion method of accounting for long term
construction contracts is a measurement of revenue under the
A. Cost
Cost pri
princi
ncipl
ple.
e.
B. Realiz
Realizati
ation
on princi
principle
ple..
C. Object
Objectivi
ivity
ty princi
principle
ple
D. Mon
Moneta
etary
ry princi
principle
ple..
(Comprehensive Reviewer, Hilario Tan)

253. When work to be done and costs to be incurred on a long-term contract can be
estimated dependably, which of the following methods of revenue recognition is
 preferable?
A. Instal
Installme
lmentnt method
method
B. Comple
Completedted-co
-contr
ntract
act meth
method
od
C. Percen
Percentag
tage-o
e-of-c
f-compl
ompleti
etion
on method
method
D. None
None ofof the
these
se
(Comprehensive Reviewer, Hilario Tan)

254. Which
hich of the following is not
not an element identified by the AICPA as bein eing necess
essary
ary
in order to use percentage-of-completion accounting?
A. The construct
construction
ion period
period can be reasonably
reasonably estimat
estimated.
ed.
B. The buyer can
can be expected
expected to satisfy
satisfy obligati
obligations
ons under the
the contract.
contract.
 C. Dependable
Dependable estimates
estimates can be made
made of the extent of progres
progresss toward completi
completion.
on.
D. Dependable
Dependable estimates
estimates can be made
made of contract
contract costs.
costs.
(Comprehensive Reviewer, Hilario Tan)

255. JUMBO Corp. uses the percentage-o e-of-com

ompl
pleetion method of revenu
enue reco
ecognitnition in
acco
accoun
untting
ing for its
its long-
ong-tetermrm cons
constr
truc
ucttion
ion cont
contra
ract
ctss. JUMBO
UMBO Corp
Corp.’
.’ss prog
progrress
ess bil
billing
lingss
account is a
A. Reve
Revenue
nue accou
accountnt..
B. Non-cu
Non-curre
rrent
nt liabil
liability
ity account
account..
C. Contra
Contra curr
current
ent asse
assett account
account..
D. Contra
Contra non-cur
non-current
rent asset account.
account.
(Comprehensive Reviewer, Hilario Tan)

256. The profession requires that the percentage-of-completion method be used when
certain conditions exist. Which of the following is not one of those necessary conditions?
A. Estimates
Estimates of progress
progress toward
toward completion,
completion, revenues,
revenues, and costs are reasonabl
reasonably
y
dependable.
B. The contractor
contractor can
can be expected
expected to perform
perform the contract
contractual
ual obligation
obligation..
C. The buyer can be expected
expected to satisfy
satisfy some of the
the obligations
obligations under
under the contract.
contract.
D. The contract
contract clearly
clearly specifies
specifies the enforceable
enforceable rights
rights of the parties,
parties, the
consideration to be exchanged, and the manner and terms of settlement.
(Comprehensive Reviewer, Hilario Tan)

For Items #257-269, use the following information:

The following information pertain to installment sales of Uniwide Variety Store:
■ Down payment: 20%
■ Instalment sales: P545,000 in Year 1, P785,000 in Year 2, and P968,000 in Year 3
■ Markup on cost: 35%
■ Collections after down payment: 40% during the year of sale, 35% during the year
after sale, and 25% on the third year

257.
257. The real
The realiz
izat
atio
ion
n gros
grosss prof
profit
it for
for Year
Year 1 is
A. P73,
P73,47
4744
B. P99,190
190
C. P109
P109,3,357
57
D. P114
P114,8,825
25

258. The unreali

unrealized
zed gross
gross profit
profit for
for the
the installm
installment
ent sales
sales made during Year 2 as at the
the end
of Year 2 is
 A. P97,
P97,68
6899
B. P114
P114,0
,063
63
C. P131
P131,8
,880
80
D. P141
P141,1
,112
12

259..
259 The inst
install
allmen
mentt accoun
accounts
ts rece
receiva
ivable
ble at
at the
the end of Year
Year 3 is
A. P602
P602,9,991
91
B. P621
P621,6,640
40
C. P652
P652,7,722
22
D. P685
P685,3,358
58

260. Using the same

same inform
information,
ation, the unreali
unrealized
zed gross
gross profit
profit at the end
end of Year 3 is
A. P161
P161,1
,166
66
B. P198
P198,5
,574
74
C. P211
P211,0
,047
47
D. P217
P217,5
,574
74
(Lupisan, 2016)

261. It is a contract specifically negotiated for the construction of an asset or a

comb
combininat
atio
ion
n of asse
assets
ts that
that are
are clos
closel
ely
y inte
interr
rrel
elat
ated
ed in term
termss of thei
theirr desi
design
gn,, tech
techno
nolo
logy
gy and
and
function or their ultimate purpose or use.
A. Constr
Construct
uction
ion contra
contractct
B. Inst
Instal
alme
mentnt contra
contract
ct
C. Franc
Franchihise
se cont
contra
ract
ct
D. Consig
Consignmen
nmentt contrac
contractt
(CPAR, handouts 2018)

262. It is a cons
onstruct
uction con
contract in which the contract
actor agre
grees to fixed a cont
ontract price, or 
a fixed rate per unit of output, which in some cases is subject to cost escalation clauses.
A. Fixed
Fixed price
price contrac
contractt
B. Cost
Cost plu
pluss cont
contra
ract
ct
C. Vari
Variab
able
le cont
contra
ract
ct
D. Mixe
Mixed d con
contrtract
act
(CPAR, handouts 2018)

263. It is a construction contract in which the contractor is reimbursed for allowable or 
otherwise defined costs, plus a percentage of these costs or a fixed fee.
A. Fixed
Fixed price
price contrac
contractt
B. Cost
Cost plu
pluss cont
contra
ract
ct
 C. Vari
Variab
able
le cont
contra
ract
ct
D. Mixe
Mixedd con
contr
tract
act
(CPAR, handouts 2018)

264. Which
hich of the followi
owing accounounting change
nges shall
all be treat
eated retrospectivel
vely inst
nstead
 prospectively by long-term construction contractor?
A. Change
Change in the const
construc
ructio
tion
n revenue
revenue
B. Change inin the estimated
estimated costs to complete
complete the
the contract
contract
C. Change inin the estimate
estimate of
of the outcome
outcome of
of the contract
contract
D. Change from
from percentage
percentage of completion
completion to cost
cost recovery
recovery method or vice versa
versa

(CPAR, handouts 2018)

265. Which of the following cost shall be excluded in the contract costs of construction
contract?
A. Costs relate
relate directly
directly to the
the specific
specific contract
contract
B. Costs that
that are directly
directly attribut
attributable
able to contract
contract activity
activity in general
general and can be
allocated to the contract
C. Such other costs
costs as are specifi
specifically
cally chargeable
chargeable to the customer
customer under
under the terms
terms of
the contract
D. Selling
Selling costs such as advertise
advertisement
ment expense
expense or commissions
commissions of real agents or
 brokers.
(CPAR, handouts 2018)

For Items #266-268, use the following information:

On July 1, 2020, ABC Construction Corp. Contracted to build an office building for XYZ, Inc.
for a total contract price of P975, 000.
2020 2021 2022
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

266. Under
266. Under the
the perc
percent
entage
age of
of compl
completi
etion
on metho
method,
d, how
how much
much is
is the
the
Construction-in-Progress at Dec. 31, 2021?
A. 650,
650, 000
000
B. 575, 00
000
C. 672, 00
000
D. 597,
597, 000
000
 267. Under the zero-profit
zero-profit method, how much is the Construction
Construction-in-P
-in-Progre
rogress,
ss, net of
of
Progress Billings at Dec. 31, 2021?
A. (125
(125,, 000)
000)
B. 125, 00000
C. 50, 00
000
D. (50,
50, 000
000))

268. Under the percentage

percentage of completion
completion method,
method, how much is the
the realize
realized
d gross
gross profit/
profit/
(loss) at Dec. 31, 2022?
A. (75,
75, 000
000))
B. (100,
100, 000)
000)
C. (50,
50, 000)
000)
D. (72,
72, 500
500))
(CPAR, handouts 2018)
For Items #269-270, use the following information:
On Janu
anuary 1, 2018, Soli olid Company acce ccepted a long-term
erm construction proproject for an initial
contract price of P1, 000, 000 to be completed on June 30, 2020. On January 1, 2019, the
cont
contra
ract
ct pric
pricee was
was incr
increa
eassed to P1,
P1, 500,
500, 000
000 by reas
eason of chan
change
ge in the desi
design
gn of the proj
projec
ectt. Th
Thee
out
outcom
come of the cons
consttruct
ructiion cont
contra
ract
ct can
can be esti
estima
mate
ted
d reli
eliabl
ably. Th
Thee proj
projec
ectt was
was comp
complelete
tedd on
Decembe
emberr 31, 202
2020 which resulted to penalt alty amounting P200
200, 000.
00. The entity pro
provided the
following data concerning the direct costs related to the said project for 2018 and 2019.

2018 2 01 9
Costs during the year 440, 000 680, 000
Remaining estimated costs to complete at year-end 660, 000 280, 000

269..
269 What
What is the
the realiz
realized
ed gross
gross prof
profit
it for
for the year
year ended
ended Decem
December
ber 31,
31, 2019?
2019?
A. 200,
200, 000
000
B. 80, 00
000
C. 180, 00
000
D. 100,
100, 000
000

270..
270 What
What is the
the balance
balance of
of constr
construct
uction
ion in
in progre
progress
ss on Decem
December
ber 31,
31, 2019?
2019?
A. 1, 200,
200, 000
000
B. 1, 020,
020, 000
000
C. 1, 120,
120, 000
000
D. 900,
900, 000
000
(CPAR, handouts 2018)
 271. Which
hich of the following projects und
undertaken
ken by an ent
entity shou
hould be acc
account
unted for as sa
a construction contract?
A. A warehouse
warehouse being
being constructed
constructed for
for the entity’s
entity’s own
own use
B. An office
office block being
being construct
constructed
ed as an investment
investment property
property
C. An item ofof plant and
and machinery
machinery being constru
constructed
cted to be sold
sold as inventory
inventory
D. A large boat being construct
constructed
ed for a third party under a specifical
specifically
ly negotiated
negotiated
contract
(Valix 2012)

272..
272 In a constru
constructi
ction
on cont
contrac
ract,
t, the term
term “clai
“claims”
ms” means
means
A. The initial
initial amount
amount ofof revenue
revenue agreed
agreed in the contra
contract
ct
B. An additional
additional amount paid paid to the contractor
contractor if specified
specified performance
performance standards
standards
are met or exceeded
C. An instruction
instruction by the customer
customer forfor a change in the scope
scope of work to be performed
performed
under the construction contract
D. An amount that that the contractor
contractor seeks
seeks to collect
collect from the customer
customer as
reimbursement for cost not included in the construction contract
con tract
(S,E,&R 2012)

273. It is
is an instruction
instruction by the customer
customer for
for a change in the
the scope
scope of work to be performed
performed
under a construction contract
A. Claim
B. Var
Variati
iation
on
C. Incen
Incentitive
ve pay
payme
mentnt
D. Initia
Initiall amou
amount
nt agreed
agreed
(Valix 2012)

274. It is is an additional
additional amount
amount paid to thethe contracto
contractorr if specified
specified perfor
performance
mance standards
standards
are met or exceeded
A . B onu s
B. Clain
C. Incen
Incentitive
ve pay
paymement
nt
D. Vari
Variatatio
ion
n
(Valix 2012)
For Items #275-277, use the following information:
Sign
Signet
et Erec
Erecto
torrs, Inc.
Inc. use
use the
the cos
cost-to
t-to-c
-cos
ostt bas
basis in det
determi
erminining
ng the
the perc
percen
enta
tage
ge of comp
compleleti
tion
on for 
for 
reve
revenu
nuee reco
recogn
gnititio
ion.
n. Th
Thee cons
constr
truc
ucti
tion
on comp
compan any’
y’ss reco
record
rdss show
show the
the foll
follow
owin
ing
g info
inform
rmat
atio
ionn on a
recently completed project for a contract price of P5,000,000
 2012 2013 2014
Actual costs incurred
P900,000 P2,550,000 P?
to date
Gross profit (loss)
100,000 350,000 (50,000)
recognized each year

275. If the revenue recognized thru the end of 2013 was P3,000,000, how much was the
estimated cost to complete the project at December 31,2013?
A. P1,5
P1,500
00,0
,000
00
B. P1,6
P1,600
00,0
,000
00
C. P1,7
P1,700
00,0
,000
00
D. P2,0
P2,000
00,0
,000
00

276..
276 How much
much was
was the
the actual
actual cost
cost incu
incurre
rred
d duri
during
ng 2014?
2014?
A. P1,7
P1,750
50,0
,000
00
B. P1,9
P1,900
00,0
,000
00
C. P2,0
P2,050
50,0
,000
00
D. P2,2
P2,200
00,0
,000
00

277. If the cost-to-cost percentage of completion was 20% thru the end of 2012, and the
customer was billed corresponding to 19% of the contract price, the project will be
recognized at December 31, 2012 as
A. An ass
asset
et of
of P50,
P50,000
000
B. An ass
asset
et of
of P950
P950,00
,000
0
C. A liab
liabili
ility
ty of P50,000
P50,000
D. A liabi
liabilit
lity
y of P1,0
P1,000,0
00,000
00
( PRTC
 PRTC 1405)

For Items #278-280, use the following information:

On Janu
Januar
ary
y 1, 2015
2015,, Brav
Bravee Cons
Constr
truc
ucttion
ion Cor
Corp. bega
begann cons
constr
truc
ucti
ting
ng a P2,1
P2,100
00,0
,000
00 cont
contrract
act. Th
Thee
following are rele
elevan
vant info
nformation providvided by the corp
orporation. Brave
ave eus
euses perc
ercent
entage
age of 
comp
comple
leti
tion
on meth
method
od.. For
For the
the year
year ende
ended d Dece
Decemb
mberer 31,
31, 2016
2016,, Brav
Bravee Cons
Constr
truc
ucti
tion
on bill
billed
ed its
its clie
client
nt
an additional 55% of the contract price

2015 2016 2017

Construction in
P441,000 ? ?
 progress
Estimated costs to
? ? --
complete
Costs incurred 425,250 969,000 675,750
Excess of Construction
330,750 current
in Progress over 84,000 current liability --
liability
Billings

278..
278 How much
much is
is the
the esti
estimat
mated
ed remai
remainin
ning
g cost
cost in 2015?
2015?
A. P1,5
P1,599
99,7
,750
50
B. P1,5
P1,555
55,0
,000
00
C. P1,6
P1,680
80,0
,000
00
D. P1,5
P1,584
84,0
,000
00

279..
279 How much
much is the realiz
realized
ed gros
grosss profi
profitt (los
(loss)
s) in 2016?
2016?
A. P(45
P(45,0
,000
00))
B. P15,750
750
C. P(60
P(60,7
,750
50))
D. P30,
P30,00
0000

280..
280 How much
much is the balance
balance of cons
constru
tructi
ction
on in progre
progress
ss in
in 2016?
2016?
A. P1,6
P1,680
80,0
,000
00
B. P2,0
P2,010
10,7
,750
50
C. P1,3
P1,349
49,2
,250
50
D. P1,3
P1,365
65,0
,000
00
( PRTC
 PRTC 1405)