PROBLEM 8-1

A Year 1 Year 2 Year 3

Cost incurred to date 2,093,000.00 6,068,000.00 8,200,000.00
Total Estimated cost to complete 8,050,000.00 8,200,000.00 8,200,000.00
Percentage of completion 26% 74% 100%

B Year 1 Year 2 Year 3

Constructions Revenue 2,340,000.00 6,808,000.00 9,200,000.00
Constructions Costs 2,093,000.00 6,068,000.00 8,200,000.00
Profit to date 247,000.00 740,000.00 1,000,000.00
Less: Recognized last year - 247,000.00 740,000.00
Profit (loss) recognize this year 247,000.00 493,000.00 260,000.00

C Y1 Contract Asset 2,093,000.00

Various Accounts 2,093,000.00
To record cost incurred

Accounts Receivable 2,700,000.00

Contract Asset 2,700,000.00
To record billings to customer

Cash 2,500,000.00
Accounts Receivable 2,500,000.00
To record collection

Cost of Construction 2,093,000.00

Contract Asset 2,093,000.00

Contract Asset 2,340,000.00

Constructions Revenue 2,340,000.00

Y2 Contract Asset 3,975,000.00

Various Accounts 3,975,000.00
To record cost incurred

Accounts Receivable 4,500,000.00

Contract Asset 4,500,000.00
To record billings to customer

Cash 4,000,000.00
Accounts Receivable 4,000,000.00
To record collection

Cost of Construction 3,975,000.00

Contract Asset 3,975,000.00

Contract Asset 4,468,000.00

Constructions Revenue 4,468,000.00

PROBLEM 8-2
June 30, 2019 Dec. 31, 2019 June 30, 2020 Dec. 31, 2020
Cost incurred to date 900,000.00 2,100,000.00 3,180,000.00 3,600,000.00
Total Estimated cost to complete 3,600,000.00 3,600,000.00 3,600,000.00 3,600,000.00
Percentage of completion 25% 58% 88% 100%

June 30, 2019 Dec. 31, 2019 June 30, 2020 Dec. 31, 2020
Constructions Revenue 1,125,000.00 2,625,000.00 3,975,000.00 4,500,000.00
Constructions Costs 900,000.00 2,100,000.00 3,180,000.00 3,600,000.00
Profit to date 225,000.00 525,000.00 795,000.00 900,000.00
Less: Recognized last period(s) - 225,000.00 525,000.00 795,000.00
 Profit (loss) recognize this period 225,000.00 300,000.00 270,000.00 105,000.00

PROBLEM 8-3
2019 2020
Cost incurred to date 1,185,800.00 4,485,000.00
Total Estimated cost to complete 5,390,000.00 6,985,000.00
Percentage of completion 22% 64%

2019 2020
Constructions Revenue 1,386,000.00 4,045,168.22
Constructions Costs 1,185,800.00 4,485,000.00
Profit to date 200,200.00 - 439,831.78
Less: Recognized last period(s) - 200,200.00
Profit (loss) recognize this period 200,200.00 - 640,031.78

Grossed-up loss in 2020 (439,831.78 / 64%) - 685,000.00

Profit Recognized last period(s) - 200,200.00
Loss recognize this period - 885,200.00

PROBLEM 8-4
1 a Cash 3,500,000.00
Advances from customer 3,500,000.00

b Contract Asset 9,800,000.00

Various Accounts 9,800,000.00

c Accounts Receivable 14,000,000.00

Contract Asset 14,000,000.00

Year-end adjustment

Cost of Construction 9,800,000.00

Contract Asset 9,800,000.00

Contract Asset 14,000,000.00

Constructions Revenue 14,000,000.00

2 Under IFRS 15, CIP and PB are no longer use. Contract Asset / Contract Liability accounts will be used instead.

PROBLEM 8-5 (include billings of 800,000; 600,000; 600,000 for 2018, 2019, and 2020, respectively. Delete the estimated remaining costs in 2020)
2018 2019 2020
Cost incurred to date 720,000.00 1,600,000.00 1,740,000.00
Total Estimated cost to complete 2,400,000.00 2,100,000.00 1,740,000.00
Percentage of completion 30% 76% 100%

2018 2019 2020

Constructions Revenue 720,000.00 1,523,809.52 2,000,000.00
Constructions Costs 720,000.00 1,600,000.00 1,740,000.00
Profit to date - - 76,190.48 260,000.00
Less: Recognized last year - - - 100,000.00
Profit (loss) recognize this year - - 76,190.48 360,000.00

Grossed-up loss in 2020 (1,523,809.52 / 76%) - 100,000.00

Profit Recognized last period(s) -
Loss recognize this period - 100,000.00
 2018
Cash 200,000.00
Advances from customer 200,000.00

Contract Asset 720,000.00

Various Accounts 720,000.00
To record cost incurred

Accounts Receivable 600,000.00

Advances from customer 200,000.00
Contract Asset 800,000.00
To record billings to customer

Cash 600,000.00
Accounts Receivable 600,000.00
To record collection

Cost of Construction 720,000.00

Contract Asset 720,000.00

Contract Asset 720,000.00

Constructions Revenue 720,000.00

2019
Contract Asset 880,000.00
Various Accounts 880,000.00
To record cost incurred

Accounts Receivable 600,000.00

Contract Asset 600,000.00
To record billings to customer

Cash 600,000.00
Accounts Receivable 600,000.00
To record collection

Cost of Construction 903,809.52

Contract Asset 903,809.52

Contract Asset 803,809.52

Constructions Revenue 803,809.52

2020
Contract Asset 140,000.00
Various Accounts 140,000.00
To record cost incurred

Accounts Receivable 600,000.00

Contract Asset 600,000.00
To record billings to customer

Cash 600,000.00
Accounts Receivable 600,000.00
To record collection

Cost of Construction 116,190.48

Contract Asset 116,190.48

Contract Asset 476,190.48

Constructions Revenue 476,190.48
PROBLEM 8-6
Cost-toCost Method (Input Measure) 2019 Experts' Estimate (Output Measure) 2019
Cost incurred to date 8,400,000.00 Cost incurred to date 8,400,000.00
Total Estimated cost to complete 12,000,000.00 Total Estimated cost to complete 12,000,000.00
Percentage of completion 70% Percentage of completion 75% based on estimate

2019 2019
Constructions Revenue 11,760,000.00 Constructions Revenue 12,600,000.00
Constructions Costs 8,400,000.00 Constructions Costs 9,000,000.00
Profit to date 3,360,000.00 Profit to date 3,600,000.00
Less: Recognized last year - Less: Recognized last year -
Profit (loss) recognize this year 3,360,000.00 Profit (loss) recognize this year 3,600,000.00

MULTIPLE CHOICE (PROBLEMS)

1 C Contract Price 3,000,000.00
Total Estimated costs 3,200,000.00
Recognized loss - 200,000.00

2 C Total Estimated costs 19,500,000.00

Percentage of completion 20%
Actual cost 3,900,000.00

Total Estimated costs 19,500,000.00

Actual cost 3,900,000.00
Estimated costs to complete 15,600,000.00

3 C Total Estimated costs 24,000,000.00

Percentage of completion 60%
Actual cost to date 14,400,000.00

Actual cost to date 14,400,000.00

Actual cost - 2019 3,900,000.00
Actual cost - 2020 10,500,000.00

4 D 2019 2020
Cost incurred to date 4,000,000.00 14,250,000.00
Total Estimated cost to complete 16,000,000.00 19,000,000.00
Percentage of completion 25% 75%

2019 2020
Constructions Revenue 5,000,000.00 15,750,000.00
Constructions Costs 4,000,000.00 14,250,000.00
Profit to date 1,000,000.00 1,500,000.00
Less: Recognized last year - 1,000,000.00
Profit (loss) recognize this year 1,000,000.00 500,000.00

**If customer is billed based on percentage of completion, then billing is always equal to revenue, therefore, no balance of Contract Asset at the end

2020 - Recognized in Recognized in

5 C cumulative 2019 2020
Constructions Revenue 15,750,000.00 5,000,000.00 10,750,000.00
Constructions Costs 14,250,000.00 4,000,000.00 10,250,000.00
Profit (loss) recognize this year 1,500,000.00 1,000,000.00 500,000.00

6 2019 2020
Cost incurred to date 2,975,000.00 6,750,000.00
Total Estimated cost to complete 8,500,000.00 9,000,000.00
Percentage of completion 35% 75%
 2019 2020
Constructions Revenue 3,500,000.00 7,500,000.00
Constructions Costs 2,975,000.00 6,750,000.00
Profit to date 525,000.00 750,000.00
Less: Recognized last year - 525,000.00
Profit (loss) recognize this year 525,000.00 225,000.00

2019
Constructions Revenue 3,500,000.00
Billings 3,000,000.00
Contract Asset 500,000.00

2020 - Recognized in Recognized in

7 B cumulative 2019 2020
Constructions Revenue 7,500,000.00 3,500,000.00 4,000,000.00
Constructions Costs 6,750,000.00 2,975,000.00 3,775,000.00
Profit (loss) recognize this year 750,000.00 525,000.00 225,000.00

8 D CIP, 2019 292,800.00

Cost incurred 252,000.00
Profit 40,800.00

CIP, 2020 (cumulative) 873,600.00

Cost incurred (cumulative 712,800.00
Profit (cumulative) 160,800.00
Profit - 2019 40,800.00
Profit - 2020 120,000.00

9 D Project X Project Y
Contract Price 4,200,000.00 3,000,000.00
Total Estimated cost to complete 3,600,000.00 3,500,000.00
Estimated gross profit (loss) 600,000.00 - 500,000.00
Percentage of completion 2/3 recognized 100% for expected loss in Project Y
Gross Profit (loss) recognize this year 400,000.00 - 500,000.00
Expenses - 200,000.00 - 100,000.00
Net profit (loss) 200,000.00 - 600,000.00

10 B Contract Price 3,000,000.00

Total Estimated costs 3,100,000.00
Recognized loss - 100,000.00

Constructions Revenue (3M x 30%) 900,000.00

Constructions Costs 1,000,000.00
Profit to date - 100,000.00

11 B 2019 2020
Cost incurred to date 3,900,000.00 6,300,000.00
Total Estimated cost to complete 7,800,000.00 8,100,000.00
Percentage of completion 50% 78%

2019 2020
Constructions Revenue 4,500,000.00 7,000,000.00
Constructions Costs 3,900,000.00 6,300,000.00
Profit to date 600,000.00 700,000.00
Less: Recognized last year - 600,000.00
Profit (loss) recognize this year 600,000.00 100,000.00

12 D 2019
Total Estimated costs 7,500,000.00
Percentage of completion 20%
 Actual cost 1,500,000.00

2020
Total Estimated costs 8,000,000.00
Percentage of completion 80%
Actual cost to date 6,400,000.00

Actual cost to date 6,400,000.00

Actual cost - 2019 1,500,000.00
Actual cost - 2020 4,900,000.00

13 B Contract Price 15,000,000.00

Total Estimated costs 15,500,000.00
Recognized loss - 500,000.00

14 2018 2019 2020

Cost incurred to date 1,140,000.00 2,820,000.00 4,800,000.00
Total Estimated cost to complete 3,800,000.00 4,700,000.00 4,800,000.00
Percentage of completion 30% 60% 100%

2018 2019 2020

Constructions Revenue 1,350,000.00 2,700,000.00 4,500,000.00
Constructions Costs 1,140,000.00 2,820,000.00 4,800,000.00
Profit to date 210,000.00 - 120,000.00 - 300,000.00
Less: Recognized last year - 210,000.00 - 200,000.00
Profit (loss) recognize this year 210,000.00 - 330,000.00 - 100,000.00

Grossed-up loss in 2019 (120,000 / 60%) - 200,000.00

Profit Recognized last period(s) 210,000.00
Loss recognize this period - 410,000.00

2020 - Recognized in Recognized in

cumulative 2019 2020
Constructions Revenue 4,500,000.00 2,700,000.00 1,800,000.00
Constructions Costs 4,800,000.00 2,900,000.00 1,900,000.00
Profit (loss) recognize this year - 300,000.00 - 200,000.00 - 100,000.00

15 D Contract asset is Zero at the end of construction

16 invalid question

17 CIP, 2019 1,220,000.00

Cost incurred 1,050,000.00
Profit 170,000.00

18 D Prestige Greenville
Contract Price 50,000,000.00 20,000,000.00
Total Estimated cost to complete 42,000,000.00 21,000,000.00
Estimated gross profit (loss) 8,000,000.00 - 1,000,000.00
Percentage of completion 25% recognized 100% for expected loss in Project Greenville
Gross Profit (loss) recognize this year 2,000,000.00 - 1,000,000.00

19 C Y1
Cost incurred to date 16,800,000.00
Total Estimated cost to complete 48,000,000.00
Percentage of completion 35%

Y1
Constructions Revenue 21,000,000.00
Constructions Costs 16,800,000.00
 Profit to date 4,200,000.00
Less: Recognized last year -
Profit (loss) recognize this year 4,200,000.00

21 D 4,500,000 / (20,000,000 + 500,000)

22 C No profit is recognize since the outcome of the project cannot be estimated reliably in 2019. No revenue recognize is equal to the actual cost incurred, therefore, gross profit (loss) is ZERO

23 D Actual cost
Materials, labor, overhead 2,400,000.00
Materials with no alternative use 200,000.00
Sale of salvage materials - 40,000.00
2,560,000.00

Total est. cost

Initial estimates 3,000,000.00
expected warranty costs 200,000.00
3,200,000.00

Percentage of completion 80%

Recognized revenue (4M x 80%) 3,200,000.00

Actual cost - 2,560,000.00
Rectification work (not recoverable from client) - 260,000.00
Gen and Admin cost (not recoverable from client) - 100,000.00
Selling expenses - 60,000.00
Net income (loss) 220,000.00

24 C 2019 2020 2021

Cost incurred to date 1,750,000.00 8,190,000.00 9,275,000.00
Total Estimated cost to complete 8,750,000.00 9,100,000.00 9,275,000.00
Percentage of completion 20% 90% 100%

2019 2020 2021

Constructions Revenue 4,200,000.00 18,900,000.00 20,825,000.00
Constructions Costs 1,750,000.00 8,190,000.00 9,275,000.00
Profit to date 2,450,000.00 10,710,000.00 11,550,000.00
Less: Recognized last year - 2,450,000.00 10,710,000.00
Profit (loss) recognize this year 2,450,000.00 8,260,000.00 840,000.00

Total billings
2019 1,400,000.00
2020 15,225,000.00
2021 4,200,000.00
20,825,000.00
Penalty (deducted from final billing) 35K x 5 175,000.00
Original contract price 21,000,000.00
based on estimate
ofit (loss) is ZERO