Answer Key

1. D
Laguna Bulacan
Contract Price 4,200,000 3,000,000
Cost incurred to date 2,400,000 2,800,000
Add: Estimated Costs to complete 1,200,000 400,000
Total Estimated Costs to complete 3,600,000 3,200,000
Estimated Gross Profit 600,000 (200,000)
x Percentage of completion (2,520,000/4,200,000) 66.7% 100%
Realized Gross Profit (loss) - to date 400,000 (200,000)
Less: Realized Gross Profit (loss) - prior years - -
Realized Gross Profit (loss) - current year 400,000 (200,000)

% of completion= 400,000 + (200,000) = 200,000

Zero Profit = 0 + (200,000) = (200,000)

2. B
2020 2021
Contract Price 48,000,000 50,400,000
Cost incurred - current year 24,600,000 18,600,000
Add: Cost incurred prior years - 24,600,000
Cost incurred to date 24,600,000 43,200,000
Add: Estimated Costs to complete 24,600,000 10,800,000
Total Estimated Costs to complete 49,200,000 54,000,000
Estimated Gross Profit (1,200,000) (3,600,000)
x Percentage of completion 100% 100%
Realized Gross Profit (loss) - to date (1,200,000) (3,600,000)
Less: Realized Gross Profit (loss) - prior years - (1,200,000)
Realized Gross Profit (loss) - current year (1,200,000) (2,400,000)

3. C
AR 6,000,000
Contract Billings 6,600,000

4. B
Progress billing to date 20x2 350,000
Divide by Billing 40%
Contract Price 875,000

Construction in progress 20x2 280,000

Divide by Contract price 875,000
Percentage of completion 20x2 32%
5. D
Construction in
P rogress Accounts Receivable

2020 2020
CI 2,800,000 Billing 3,000,000 2,000,000 Collection
RGP 400,000
end of 2020 3,200,000 end of 2020 1,000,000

6. D

7. C
20x1 20x2
Contract Price 20,330,000 20,385,000
Cost incurred to date 10,920,000 15,600,000
Add: Estimated Costs to complete 7,280,000 3,900,000
Total Estimated Costs to complete 18,200,000 19,500,000
Estimated Gross Profit 2,130,000 885,000
x Percentage of completion 60% 80%
Realized Gross Profit (loss) - to date 1,278,000 708,000
Less: Realized Gross Profit (loss) - prior years - 1,278,000
Realized Gross Profit (loss) - current year 1,278,000 (570,000)

Consideration 20,000,000
Incentive bonus 200,000
Claims/Penalty
(30% x P0) -
(60% x P300,000) 180,000
(10% x P500,000) (50,000)
Contract Price 20x1 20,330,000

Consideration 20,000,000
Incentive bonus 200,000
Claims/Penalty
(25% x P0) -
(70% x P300,000) 210,000
(5% x P500,000) (25,000)
Contract Price 20x2 20,385,000

8. C/D/B

1.
20x1 To date Prior Years Current Year
Construction Revenue 1,350,000 - 1,350,000
Construction Cost 1,350,000 - 1,350,000
Gross Profit - - -
 20x2 To date Prior Years Current Year
Construction Revenue 4,500,000 1,350,000 3,150,000
Construction Cost 4,050,000 1,350,000 2,700,000
Gross Profit 450,000 - 450,000

2.
Prior Current
20x1 To date Years Year
Construction Revenue (4,500,000 x 33.33%) 1,500,000 - 1,500,000
Construction Cost (4,050,000 x 33.33%) 1,350,000 - 1,350,000
Gross Profit 150,000 - 150,000

Prior Current
20x2 To date Years Year
Construction Revenue (4,500,000 x 100%) 4,500,000 1,500,000 3,000,000
Construction Cost (4,050,000 x 100%) 4,050,000 1,350,000 2,700,000
Gross Profit 450,000 150,000 300,000

3.
20x1 To date Prior Years Current Year
Construction Revenue - - -
Construction Cost - - -
Gross Profit - - -

20x2 To date Prior Years Current Year

Construction Revenue 4,500,000 - 4,500,000
Construction Cost 4,050,000 - 4,050,000
Gross Profit 450,000 - 450,000

9. C
Cost incurred to date 20x2: (12,000,000 x 60%) 7,200,000
Less: Cost incurred to date 20x1: (11,250,000 x 20%) 2,250,000
Cost incurred during 20x2 4,950,000

10. C

Construction in Progress
20x1
CI 262,500
RGP 42,500
end of 20x1 305,000
CI 480,000
RGP 125,000
end of 20x2 910,000

11. C
Cost incurred - current year (25 + 20 +10 +5) 60,000,000
Divide by total estimated cost to complete 180,000,000
Percentage of completion 333%
12. B
CIP 87,500
Divide: Contract price 700,000
% of completion 12.5%

Cost incurred to date (CIP 87,500 - RGP 17,500) 70,000

Divide by: % 12.5%
Total cost 560,000

13. A
Contract Price 21,000,000
Cost incurred - current year (5 + 2 + 2) 9,000,000
Add: Cost incurred prior years -
Cost incurred to date 9,000,000
Add: Estimated Costs to complete 9,000,000
Total Estimated Costs to complete 18,000,000
Estimated Gross Profit 3,000,000
x Percentage of completion 50%
Realized Gross Profit (loss) - to date 1,500,000
Less: Realized Gross Profit (loss) - prior years -
Realized Gross Profit (loss) - current year 1,500,000

14. D/A
2025
Progress billings 1,837,500
Divide by Billing 2/5
Contract Price 4,593,750

Construction in Progress 1,653,750

Divide by Contract Price 4,593,750
Percentage of Completion 36%

2024 2025
Progress billings 435,000 1,837,500
Excess of Construction in Progress over Billings – due from /
(due to) 116,250 (183,750)
Construction in Progress 551,250 1,653,750
Construction cost to date (446,250) (1,260,000)
Realized gross profit to date 105,000 393,750
Realized gross profit prior years - (105,000)
Realized gross profit (loss) current year 105,000 288,750

15. A
Cost incurred to date 595,000
Estimated cost to complete 820,000
Total Estimated Cost to complete 1,415,000
Gross loss (78,000)
Contract Price 1,337,000
16. C
2022 2023
Contract Price 4,500,000 4,000,000
Cost incurred to date 3,075,000 3,780,000
Add: Estimated Costs to complete 1,025,000 420,000
Total Estimated Costs to complete 4,100,000 4,200,000
Estimated Gross Profit 400,000 (200,000)
x Percentage of completion 75% 100%
Realized Gross Profit (loss) - to date 300,000 (200,000)
Less: Realized Gross Profit (loss) - prior years - 300,000
Realized Gross Profit (loss) - current year 300,000 (500,000)

17. C
2021 2022 2023
Realized Gross Profit (loss) - current year 750,000 (250,000) (800,000)
Add: Realized Gross Profit (loss) - prior years - 750,000 500,000
Realized Gross Profit (loss) - to date 750,000 500,000 (300,000)
Divide by: Percentage of completion 37.5% 50% ?
Estimated Gross Profit 2,000,000 1,000,000
Total Contract Price 10,000,000 10,000,000
Total Estimated Cost to complete 8,000,000 9,000,000
x Percentage of completion 37.5% 50%
Cost Incurred to date 3,000,000 4,500,000
Add: Cost incurred 2023 3,740,000
Total Cost incurred to date 2023 8,240,000
Realized gross profit (loss) to date 2023 (300,000)
Total Construction in Progress 2023 7,940,000

18. B/C/A
2018
Contract Price 2,000,000
x Percentage of Completion (880/2,200) 40%
Contract Revenue to date 800,000

The contract revenue shall be recognized based on the percentage of completion rate.

2018 2019
Contract Price 2,000,000 3,000,000
Cost incurred - current year 880,000 1,360,000
Add: Cost incurred prior years - 880,000
Cost incurred to date 880,000 2,240,000
Add: Estimated Costs to complete 1,320,000 560,000
Total Estimated Costs to complete 2,200,000 2,800,000

Estimated Gross Profit (200,000) 200,000

x Percentage of completion 100% 80%
Realized Gross Profit (loss) - to date (200,000) 160,000
Less: Realized Gross Profit (loss) - prior years - (200,000)
Realized Gross Profit (loss) - current year (200,000) 360,000

In year 2018, the entity shall recognized the anticipated loss at full amount irrespective of the
percentage of completion rate.
 Cost incurred to date 2019 2,240,000
Realized gross profit (loss) -2018 (200,000)
Realized gross profit (loss) -2019 360,000
Total Construction in Progress - 2019 2,400,000

19. B
Accounts Receivable
Billings 8,000,000 5,500,000 Collection
end of 2020 2,500,000
Billings 36,000,000 33,000,000 Collection
end of 2021 5,500,000
Billings 6,000,000 11,500,000 Collection
end of 2022 -

The progress billing in year 2021 is P36M = Total Contract Price P50M – PB 8 – P6M
The total progress billings is equal to the total contract price upon completion of the contract.

20. B
150 m x 10% = 15m + (32% x 150m x 90%) = 58,200,000

21. C
2020 2021 2022 Total
Recognized revenue P 1,100,000 P1,300,000 (2) P1,100,000 P3,500,000
Cost of revenue 1,000,000 1,250,000 1,150,000 (3) 3,400,000
Gross Profit (loss) P 100,000 – (1) P 50,000 P (50,000) P 100,000

22. D
23. A
24. B
25. A
26. B
27. D
28. B
29. D
30. A
31. A
32. D
33. D
34. B
35. A
36. A
Straight Problems
Problem 1

Contract Price 52 Contract Price 52

Total Estimated cost to
complete Total Estimated cost to complete
Cost incurred prior years 0 Cost incurred prior years 9.2
Cost incurred current year 9.2 Cost incurred current year 22
Cost incurred to date 9.2 Cost incurred to date 31.2
Estimated cost to complete 30.8 40 Estimated cost to complete 9.6 40.80
Estimated Gross Profit 12 Estimated Gross Profit 11.20
x % of completion 25% x % of completion 80%
RGP to date 3 RGP to date 8.96
RGP prior year - RGP prior year (3.00)
RGP current year 3 RGP current year 5.96

% of completion 2020 = 41 km/164 km = 25%

% of completion 2021 = 41 km +90.20 km = 132.20 km/164 km = 80%

Problem 2
A. Percentage of Completion
Answer
P1 P2 P3
Contract Price 1,250,000 1,750,000 625,000
Cost incurred to date 937,500 250,000 250,000
Add: Estimated Costs to complete - 1,000,000 250,000
Total Estimated Costs to complete 937,500 1,250,000 500,000
Estimated Gross Profit 312,500 500,000 125,000
x Percentage of completion 100% 20% 50%
Realized Gross Profit (loss) - to date 312,500 100,000 62,500
Less: Realized Gross Profit (loss) - prior years - - -
Realized Gross Profit (loss) - current year 312,500 100,000 62,500

CIP
Proj.1
CI 937,500 1,250,000 Proj 1
RGP 312,500

Proj 2
CI 250,000
RGP 100,000

Proj 3
CI 250,000
RGP 62,500
662,500
Project 1 is already completed, therefore the construction in progress account and progress billings will
closed.

B. Zero profit Method

CIP
Proj.1
CI 937,500 1,250,000 Proj 1
RGP 312,500

Proj 2
CI 250,000
RGP

Proj 3
CI 250,000
RGP
500,000

Under zero profit method profit will not be recognized until the outcome of the construction is measured
reliably.

Problem 3
If silent, assume the entity right to consideration is unconditional

20x1 20x2
Contract Price 7,500,000 7,500,000
Cost incurred - current year 2,250,000 4,500,000
Add: Cost incurred prior years - 2,250,000
Cost incurred to date 2,250,000 6,750,000
Add: Estimated Costs to complete 4,500,000 -
Total Estimated Costs to complete 6,750,000 6,750,000
Estimated Gross Profit 750,000 750,000
x Percentage of completion 33% 100%
Realized Gross Profit (loss) - to date 250,000 750,000
Less: Realized Gross Profit (loss) - prior years - 250,000
Realized Gross Profit (loss) - current year 250,000 500,000

20x1
Construction in Progress 2,250,000
Cash 2,250,000

Accounts receivable 2,750,000

Progress Billings 2,750,000

Cash 1,750,000
Accounts Receivable 1,750,000

Construction Cost 2,250,000

Construction in Progress 250,000
Construction Revenue 2,500,000
 20x2
Construction in Progress 4,500,000
Cash 4,500,000

Accounts Receivable 4,750,000

Progress Billings 4,750,000

Cash 5,750,000
Accounts Receivable 5,750,000

Construction Cost 4,500,000

Construction in Progress 500,000
Construction Revenue 5,000,000

Progress Billings 7,500,000

Construction in Progress 7,500,000

B. Zero Profit Method

20x1 20x2
Contract Price 7,500,000 7,500,000
Cost incurred - current year 2,250,000 4,500,000
Add: Cost incurred prior years - 2,250,000
Cost incurred to date 2,250,000 6,750,000
Add: Estimated Costs to complete 4,500,000 -
Total Estimated Costs to complete 6,750,000 6,750,000

Estimated Gross Profit 750,000 750,000

x Percentage of completion NA 100%
Realized Gross Profit (loss) - to date - 750,000
Less: Realized Gross Profit (loss) - prior years - -
Realized Gross Profit (loss) - current year - 750,000

20x1
Construction in Progress 2,250,000
Cash 2,250,000

Accounts Receivable 2,750,000

Progress Billings 2,750,000

Cash 1,750,000
Accounts Receivable 1,750,000

Construction Cost 2,250,000

Construction Revenue 2,250,000

20x2
Construction in Progress 4,500,000
Cash 4,500,000
 Accounts Receivable 4,750,000
Progress Billings 4,750,000

Cash 5,750,000
Accounts Receivable 5,750,000

Construction Cost 4,500,000

Construction in Progress 750,000
Construction Revenue 5,250,000

Progress Billings 7,500,000

Construction in Progress 7,500,000

Problem 4

20x1 X Y
Contract Price 400,000 600,000

Cost incurred - current year 350,000 240,000

Add: Cost incurred prior years -
Cost incurred to date 350,000 240,000
Add: Estimated Costs to complete - 160,000
Total Estimated Costs to complete 350,000 400,000

Estimated Gross Profit 50,000 200,000

x Percentage of completion 100% 60%
Realized Gross Profit (loss) - to date 50,000 120,000
Less: Realized Gross Profit (loss) - prior years - -
Realized Gross Profit (loss) - current year 50,000 120,000
1 Project X
Construction in Progress 350,000
Cash 350,000

Project Y
Construction in Progress 240,000
Cash 240,000

2 Project X - December 1, 20x1

Construction cost 350,000
Construction in Progress 50,000
Contract Revenue 400,000

Project Y
Construction cost 240,000
Construction in Progress 120,000
Contract Revenue 360,000

3 Project X - December 1, 20x1

Contract Asset 400,000
Progress Billings 400,000
 4 Project Y
Construction in Progress 160,000
Cash 160,000

5 Project Y - March 25, 20x2

Construction cost 160,000
Construction in Progress 80,000
Construction Revenue 240,000

6 Project Y - March 30 , 20x2

Accounts Receivable 1,000,000
Contract Asset 400,000
Progress Billing 600,000

Problem 5

20x1
Contract Price 10,000,000
Cost incurred - current year 5,400,000
Add: Cost incurred prior years -
Cost incurred to date 5,400,000
Add: Estimated Costs to complete 3,600,000
Total Estimated Costs to complete 9,000,000

Estimated Gross Profit 1,000,000

x Percentage of completion 60%
Realized Gross Profit (loss) - to date 600,000
Less: Realized Gross Profit (loss) - prior years -
Realized Gross Profit (loss) - current year 600,000

1 Construction in Progress 5,400,000

Cash 5,400,000

2 Construction Cost 5,400,000

Construction in Progress 6,000,000
Construction Revenue 6,000,000

3 Accounts Receivable 7,000,000

Progress Billings 7,000,000

Or Alternative entry
3 Accounts Receivable (60% x 10M) 6,000,000
Contract Asset 1,000,000
Progress Billings 7,000,000

Accounts receivable account will be debited only based on the performance completed which 60% stage of
completion. Thus, the excess billing will be debited to contract assets because the entity’s right to the excess
amount is conditional.

Problem 6

20x1
1 Deferred Construction costs 9,000,000
Cash 9,000,000
 To defer the cost incurred during the year

2 No entry to recognized construction revenue, cost

and realized gross profit

3 Contract Asset 8,000,000

Progress Billings 8,000,000
To record the progress billing

Note: The entity has conditional right to payment because the performance
obligation is not yet satisfied

20x2
1 Deferred Construction costs 22,000,000
Cash 22,000,000
To defer the cost incurred during the year

2 Construction in Progress 31,000,000

Deferred Construction cost 31,000,000
To record the construction cost incurred

3 Construction cost 31,000,000

Construction in Progress 5,000,000
Construction Revenue 36,000,000
To recognized cost, revenue and gross profit

4 Accounts Receivable 36,000,000

Contract Asset 8,000,000
Progress Billing 28,000,000
To record the progress billing and accounts
receivable