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a
Percentage of Completion Method:
Contract Price
Less: Total estimated cost
Cost incurred
Estimated remaining cost
Gross profit estimated
% of completion (200,000/600,000)
Gross profit to be recognized
P1,000,000
P 200,000
_400,000
__600,000
400,000
__33 1/3%
P 133,333
a P100,000
Contract Price
Less: Total estimated cost
Estimated gross profit
% of completion:
2007 (3,900,000/7,800,000)
2008(6,300,000/8,100,000)
Gross profit earned to date
Less: Gross profit earned in prior year
Gross profit earned each year
10-3:
10-4:
10-5:
10-6:
10-7:
P9,000,000
a
Contract Price
Less: Total estimated cost (3,600,000 + 1,200,000)
Estimated gross profit
% of completion (3,600,000/4,800,000)
Gross profit earned to date
Less: Gross profit earned in 2007
Gross profit earned in 2008
b
Contract Price
Less: Total estimated cost (930,000 + 2,170,000)
Loss
2007
P9,000,000
_7,800,000
1,200,000
2008
_8,100,000
900,000
50%
_________
600,000
________
P 600,000
______78%
700,000
___600,000
P 100,000
P6,000,000
_4,800,000
1,200,000
_____75%
900,000
__600,000
P 300,000
P3,000,000
_3,100,000
(P 100,000)
b
Total cost to date, 2011 (4,800,000 X 60%)
Less: Cost incurred in 2010 (4,500,000 X 20%)
Cost incurred in 2011
P2,880,000
__900,000
P1,980,000
a
Percentage of Completion Method:
Contract Price
Less: Total estimated cost (900,000/1,800,000)
Estimated gross profit
% of completion (900,000/2,700,000)
Gross profit recognized, 2010
Add: Cost Incurred
Construction in Progress - 2010
P3,000,000
_2,700,000
300,000
___33.33%
100,000
___900,000
P 1,000,000
P 900,000
a
Contract Price
Less: Total estimated cost
Estimated gross profit
% of completion
Gross Profit earned to date
Gross Profit earned in prior year
Gross Profit earned this year
P4,200,000
2010
P4,200,000
_3,000,000
1,200,000
_____20%
240,000
_______
P 240,000
2011
_3,750,000
450,000
____100%
450,000
__240,000
P 210,000
10-8:
b
Collections:
Contract Billings
Less: Accounts receivable
Collections
Initial Gross Profit:
Contract Price
Gross Profit rate:
Income recognized
Divide by Construction in Progress
Initial Gross Profit
10-9:
P 47,000
___15,000
P 32,000
P 800,000
10,000
50,000 = _____20%
P 160,000
a
Gross profit (loss) earned in 2011
Gross profit earned in prior years
Gross profit earned to date - 2011
Divide by percentage of completion - 2011
Estimated gross profit - 2011
Less: Contract price
Total estimated cost
Less: Cost incurred - 2011
Cost incurred to date - 2010
Less: Cost incurred - 2009
Cost incurred in 2010
10-10:
b
Gross profit earned to date - 2010 (P40,000 + P140,000)
Divide by estimated gross profit - 2010:
Contract price
Gross profit rate [180,000/(1,020,000 + 180,000)]
Percentage of completion - 2010
10-11:
10-12:
10-14:
P 180,000
P2,000,000
___X 15%
__300,000
60%
10-13:
(P 20,000)
_180,000
160,000
___100%
160,000
2,000,000
1,840,000
_820,000
1,020,000
__360,000
P 660,000
P2,000,000
__300,000
1,700,000
1,020,000
P 680,000
d
2010:
Construction in progress
Less: Construction costs
Gross profit recognized - 2010
P 244,000
__210,000
P 34,000
2011:
P 484,000
__384,000
P 100,000
d
Project 1
Percentage of Completion Method:
Contract price
Less: Total estimated cost
Cost incurred to date - 2011
Estimated cost to complete
Total
Estimated gross profit (Loss)
Percentage of completion
Profit (loss) to be recognized
Total is (P10,000)
Zero Profit Method - The loss (P50,000) for project 2 only.
P 420,000
Project 2
P 300,000
P 240,000 P 280,000
__120,000 ___70,000
__360,000 __350,000
60,000
(50,000)
__66.67% _______
P 40,000 (P 50,000)
10-15:
a
Contract price (cost X 120%)
Less: Total estimated costs
(1)Cost incurred to date
Estimated cost to complete
(2)Total
Estimated gross profit
Percentage of completion (1 2)
Gross profit earned to date
Gross profit earned in prior years
Gross profit earned this year
10-16:
2010
2011
P3,744,000 P3,744,000
546,000
_2,054,000
_2,600,000
1,144,000
_____20%
1,544,400 3,120,000
_1,315,000 ________
_2,860,000 _3,120,000
884,000
624,000
_____54% ____100%
240,240
_______
P 240,240
477,360
624,000
__240,240 __477,360
P 237,120 P 146,640
d
Contract price
Less: Total estimated cost
Cost incurred to date
Estimated cost to complete
Total
Estimated gross profit
Percentage of completion:
2010 (1,425,000 - 50,000) 5,500,000
2011 (3,040,000 - 50,000) 5,000,000
10-17:
2009
P3,744,000
P6,300,000
2010
P6,300,000
2011
1,425,000 3,040,000
_4,075,000 _1,960,000
P5,500,000 P5,000,000
800,000 1,300,000
25%
________
__59.80%
200,000
777,400
________ __200,000
P 200,000 P 577,400
a
Cash collections:
Progress billings
Less: Accounts receivable, end
Collection
P1,500,000
__500,000
P1,000,000
P1,600,000
__200,000
P1,400,000
Apartment A
2010
2011
1,620,000
1,620,000
Apartment B
2010
2011
2,520,000 2,520,000
Contract price
Less: Total Estimated Costs
(1)Cost incurred to date
Estimated cost to complete
(2)Total estimated cost
Estimated Gross Profit
Percentage of completion (1 2)
P 600,000
840,000
1,440,000
180,000
_41.67%
P1,200,000
240,000
1,440,000
180,000
_83.33%
P1,560,000 P2,310,000
690,000
2,250,000 2,310,000
270,000
210,000
_69.33% _100.00%
75,000
_______
P 75,000
150,000
___75,000
P 75,000
187,200
_______
P 187,000
210,000
__187,200
P 22,800
2010
2011
P97,800
Zero Profit Method : P210,000 gross profit earned in 2011 for Apartment B.
10-19:
d
Contract price:
2010
2011 (P6,000,000-P50,000)
Less: Total estimated costs
(1)Cost incurred to date
Estimated cost to complete
(2)Total estimated cost
P6,000,000
_________ P5,950,000
2,340,000
260,000
2,600,000
2,650,000
2,650,000
3,300,000
___100%
3,060,000
_______
P3,060,000
3,300,000
3,060,000
P 240,000
a
(1)Cost incurred to date
(2)Estimated cost to complete
(3)Total Estimated Costs
2009
P3,400,000
1,600,000
5,000,000
Percentage of completion (1 3)
Contract price
Less: Total estimated cost
Estimated Gross Profit
Percentage of completion
Gross profit earned (loss) to date
Add: Cost incurred to date
Construction in Progress
Less: Contract billings
Balance
10-21:
3,400,000
____90%
2010
2011
P5,950,000 P6,150,000
150,000
6,100,000
6,150,000
68%
98%
100%
d
Construction in Progress:
Cost incurred to date, 2010
Gross profit (loss), 2010 (Schedule 1)
Less: Contract billings, 2009 (P3,250,000 x 75%)
P2,625,000
(125,000) P2,500,000
2,437,500
P 62,500
Contract price
Total estimated cost:
Cost to date
Estimated cost to complete
Total
10-22:
2,625,000
750,000
2,687,500
3,375,000
562,500
40%
(125,000)
225,000
(125,000)
225,000
10-23:
1,075,000
1,612,500
a
2010
Contract price
Estimated costs:
Cost to date
Estimated cost to complete
Total
P 225,000 P(350,000)
2008
2009
P2,800,000 P2,800,000
1,300,000
1,360,000
2,660,000
140,000
48.87%
68,418
68,418
1,960,000
780,000
2,740,000
60,000
71.53%
42,918
68,418
(25,500)
2010
P2,800,000
2,440,000
380,000
2,820,000
(20,000)
(20,000)
42,918
(62,918)
Project A
P2,900,000
Project B
P3,400,000
Project C
P 1,700,000
1,680,000
1,120,000
1,440,000
1,760,000
320,000
960,000
2,800,000
3,200,000
1,280,000
100,000
60%
200,000
45%
420,000
25%
P 60,000
P 90,000
P 105,000
2011
Contract price
Estimated costs
Cost to date2,640,000
Estimated costs to complete
Project A
P2,900,000
Total
Project B
P3,400,000
Project C
P1,700,000
Project D
P 2,000,000
2,120,000
0
1,183,000
1,360,000
560,000
117,000
1,040,000
2,640,000
3,480,000
1,300,000
1,600,000
260,000
100%
260,000
60,000
P 200,000
(80,000)
400,000
91%
400,000
35%
(80,000)
364,000
90,000
105,000
140,000
0
P(170,000)
2010
P 255,000
120,000
2011
P 429,000
120,000
P 135,000
P 309,000
c
Contract price
Gross profit earned to date, 2008 (P900,000 P100,000)
P10,000,000
800,000
10-25:
9,200,000
4,100,000
P 5,100,000
P 900,000
P 1,500,000
60%
d
Construction in progress:
Cost incurred to date
Gross profit earned to date (P2,500,000 P2,000,000)
P 440,000
110,000
Total
Less: Contract billings (P2,500,000 x 30%)
550,000
750,000
10-27:
a
Contract price
Total estimated cost:
Cost incurred to date:
Site labor cost
Cost of construction materials
Depreciation of special plant & equip
Total
Estimated cost to complete
Estimated gross profit
Percentage of completion (45/100)
Gross profit to be recognized
a
Cost incurred to date- 2010
Total estimated cost (8,000,000 / 40%)
Estimated cost to complete
Cost incurred in 2010
P( 200,000)
P120,000,000
10,000,000
30,000,000
5,000,000
45,000,000
55,000,000
100,000,000
20,000,000
45%
P 9,000,000
20,000,000
8,000,000
P12,000,000
3,700,000
3,700,000
8,300,000
12,450,000
P20,750,000
a
2010
Contract price
Total estimated cost:
Contract 1
P600,000
Contract 2
P450,000
150,000
150,000
300,000
300,000
50%
P150,000
87,500
162,500
250,000
200,000
35%
P70,000
2011
Contract 1
600,000
350,000
250,000
80%
200,000
150,000
50,000
Contract price
Total estimated cost
Estimated gross profit
Percentage of completion
Gross profit earned to date
Gross profit earned in 2007
Gross profit earned this year
Contract 2
450,000
300,000
150,000
60%
90,000
70,000
20,000
Contract 3
900,000
500,000
400,000
36%
144,000
144,000
P 640,000
434,000
P1,074,000
189
a
Bicol
Davao
Contract price
P875,000
P1,225,000 P437,500
Total estimated cost
Cost incurred
656,250
175,000
Est. cost to complete
700,000
Total estimated cost
656,250
875,000
Estimated gross profit 218,750
350,000
87,500
Percentage of completion
100%
20%
Gross profit earned
P218,750
P 70,000
Total cost incurred
Total gross profit earned
Construction in progress
Less: Billings
Due from (to)
10-30:
10-31:
Aklan
175,000
175,000
350,000
Total
1,006,250
50%
P43,750
332,500
a
Contract price
Total estimated cost:
Cost incurred
Estimated cost to complete
Estimated gross profit
Percentage of completion
Gross profit recognized
P40,825,000
8,475,000
28,400,000
a
Cost of direct materials used
Cost of direct labor, including supervision
Cost of indirect materials used
Depreciation of plant and equipment used on the contract
Payroll of design and technical department
Insurance costs
Costs of contracted research and development activities
General and administrative expenses
Borrowing costs
Total cost incurred to date
Contract price
Less total estimated costs
Estimated gross profit (loss)
% of completion:
Project 1 (P120,000 / P180,000)
36,875,000
3,950,000
22.983%
P 907,830
P220,000
150,000
55,000
120,000
80,000
60,000
105,000
30,000
130,000
P930,000
P350,000
35.77%
P125,195
Project 1
P420,000
180,000
240,000
66.67%
Project 2
P150,000
175,000
(25,000)
Project 2
Realized gross profit (loss)
Expenses
Net income (loss), Dec. 31, 2011, P120,000
2.
100%
(25,000)
5,000
P(30,000)
160,000
10,000
P150,000
a, Project 2 only.
10-33: a
Contract price
Total estimated costs
Estimated gross profit
% of completion *
Realized gross profit
AA
P384,000,000
350,240,000
33,760,000
5%
P1,688,000
BB
P35,000,000
30,552,000
4,448,000
75%
P3,336,000
CC
P175,000,000
143,640,000
31,360,000
75%
P23,520,000
DD
P99,400,000
91,200,000
8,200,000
50%
P4,100,000
10-35:
Supporting Computation:
Contract price
Reduction due to delay
Net contract price
Less total estimated cost:
Cost incurred to date
Estimated costs to complete
Total
Estimated gross profit
% of completion (CITD / TEC)
Realized gross profit to date
Realized gross profit in prior years
Realized gross profit (loss) this year
1.
2.
3.
2009
P6,600,000
2010
P6,600,000
6,600,000
6,600,000
2011
P6,600,000
90,000
5,910,000
1,782,000
3,618,000
5,400,000
5,400,000
33%
396,000
P396,000
3,850,000
1,650,000
5,500,000
5,500,000
70%
770,000
396,000
P374,000
5,500,000
5,500,000
5,500,000
100%
410,000
770,000
P(360,000)
a
Realized gross profit
Operating expenses
Net income
a
Construction in progress (P770,000 + P3,850,000)
Contract billings
Balance
a
Construction in progress
Contract billings
Balance
P374,000
90,000
P284,000
P4,620,000
3,100,000
P1,520,000
P2,850,000
3,100,000
750,000
SOLUTIONS TO PROBLEMS
Problem 10 1
(a)
Contract Price
Less: Total estimated cost
(1) Cost incurred to date
Estimated costs to complete
(2) Total
Estimated gross profit
Percentage of completion (1 2)
Estimated gross profit to date
Less: Gross profit earned in prior year
Gross profit earned this year
(b)
Contract Price
Less: Total cost incurred
Gross profit
(c)
2010:
2011:
2010
P 450,000
2011
P 450,000
200,000
__100,000
__300,000
150,000
______2/3
320,000
_______
_320,000
130,000
___100%
100,000
_______
P 100,000
130,000
__100,000
P 30,000
P 450,000
__320,000
P 130,000
Construction in Progress
Cost of construction
Construction Revenue
Construction in Progress
Cost of Construction
Construction Revenue
100,000
200,000
300,000
30,000
320,000
350,000
Problem 10 2
(a)
(b)
Construction Revenue
Less: Cost incurred
Gross profit 2011
P1,250,000
_1,250,000
P
0
P1,250,000
_1,740,000
P(490,000)
Contract price
Less: Total estimated costs
Cost incurred to date
Estimated costs to complete
Estimated gross profit
Percentage of Completion (P1,250,000 500,000)
P5,800,000
P1,250,000
3,740,000
5,000,000
800,000
_____25%
Gross profit
P 200,000
P1,450,000
_1,740,000
P(290,000)
(a)
Contract Price
Less: Total estimated costs
(1) Cost incurred to date
Estimated costs to complete
(2) Total
Estimated gross profit
Percentage of completion (1 2)
Problem 10 3
2008
2009
P55,000,000
P55,000,000
2010
P55,000,000
2011
P55,000,000
15,000,000
_35,000,000
_50,000,000
5,000,000
______30%
25,000,000
25,000,000
50,000,000
5,000,000
_____50%
35,000,000
15,000,000
50,000,000
5,000,000
_____70%
50,000,000
________
50,000,000
5,120,000
____100%
1,500,000
________
P 1,500,000
2,500,000
_1,500,000
P 1,000,000
3,500,000
_2,500,000
P 1,000,000
5,000,000
_3,500,000
P 1,500,000
15,000,000
15,000,000
(b)
2010
2011
15,000,000
15,000,000
15,000,000
20,000,000
15,000,000
20,000,000
(3) Cash
Accounts Receivable
12,000,000
1,000,000
15,000,000
25,000,000
12,000,000
25,000,000
1,500,000
15,000,000
16,000,000
16,500,000
Problem 10 4
(a)
Cost incurred to date
Divide by total estimated cost
Percentage of Completion
(b)
(c)
Contract Price
Less: Total Estimated Cost
Cost incurred to date
Estimated costs to complete
Total
Estimated gross profit
Percentage of completion
Gross profit earned to date
Less: Gross profit earned in prior yrs.
Gross profit earned this year
2009
P 1,000,000
P 9,000,000
11.11%
2010
P 5,500,000
P11,000,000
50%
2011
P10,000,000
_12,000,000
83.33%
2009
P15,000,000
2010
P15,000,000
2011
P15,000,000
1,000,000
__8,000,000
__9,000,000
6,000,000
___11.11%
666,600
________
P 666,600
5,500,000
__5,500,000
_11,000,000
4,000,000
______50%
2000,000
___666,600
P 1,333,400
10,000,000
__2,000,000
_12,000,000
3,000,000
___83.33%
9,500,000
_2,000,000
P 500,000
1,000,000
1,325,000
(3) Cash
Accounts Receivable
1,200,000
666,600
1,000,000
1,000,000
1,325,000
1,200,000
1,666,600
Problem 10 5
(1)
Contract Price
Less: Total Estimated Cost
Cost incurred to date
Estimated cost to complete
Total
Estimated gross profit
Percentage of completion
Gross profit (loss) to date
Less: Gross profit (loss) in prior yrs.
Gross profit (loss) this year
(2)
2008
P14,000,000
2009
P14,000,000
2010
P14,000,000
2011
P14,000,000
6,500,000
__6,800,000
_13,300,000
700,000
___48.87%
342,090
________
P 342,090
9,800,000
_3,900,000
13,700,000
300,000
___71.53%
214,590
___342,090
P( 127,500)
12,200,000
_1,900,000
14,100,000
( 100,000)
_____100%
( 100,000)
___214,590
P( 314,590)
13,900,000
________
13,900,000
100,000
____100%
100,000
( 100,000)
P 200,000
2008
2009
2010
2011
Cost of construction
6,500,000
3,300,000
2,400,000
1,700,000
Construction in progress 342,090
127,500
314,590
200,000
Construction Revenue
6,842,090
3,172,500
2,085,410
1,900,000
Problem 10 6
(1)
Contract Price
Less: Total estimated costs
Cost incurred to date
Estimated costs to complete
Total
Estimated gross profit
2008
P 6,000,000
2009
P 6,000,000
2010
P 6,000,000
3,400,000
_2,100,000
_5,500,000
500,000
5,950,000
___150,000
_6,100,000
( 100,000)
6,150,000
________
_6,150,000
( 150,000)
Percentage of completion
Gross profit (loss) to date
Gross profit (loss) in prior yrs.
Gross profit (loss) this year
___61.82%
309,100
________
P 309,100
_______
( 100,000)
__309,100
P 409,100
________
( 150,000)
( 100,000)
P 50,000
Cash
Accounts Receivable
Contract Billings
Construction in progress
195
2008
2009
3,400,000
2,550,000
309,100
409,100
3,709,100
2,140,900
2010
200,000
50,000
150,000
400,000
400,000
6,000,000
6,000,000
Problem 10 7
(1)
Contract Price
Less: Total Estimated Cost
Cost incurred to date
Estimated costs to complete
Total
Estimated gross profit
Engineer's estimate of comp.
Gross profit to date
Less: Gross profit earned in prior yrs.
Gross profit earned this yr.
(2)
(a) Construction on progress
Cash
(3)
2009
P16,000,000
2010
P16,000,000
2011
P16,000,000
4,600,000
__9,640,000
_14,240,000
1,760,000
______31%
545,600
________
P 545,600
9,100,000
__5,100,000
_14,200,000
1,800,000
______58%
1,044,000
__545,600
P 498,410
14,350,000
_________
_14,350,000
1,650,000
_____100%
1,650,000
_1,044,000
P 606,000
2009
4,600,000
2010
4,500,000
4,600,000
5,000,000
(c) Cash
Accounts receivable
4,500,000
4,600,000
545,600
4,500,000
6,000,000
5,000,000
5,250,000
5,000,000
6,000,000
5,400,000
4,500,000
5,000,000
6,100,000
5,400,000
4,500,000
498,400
5,145,600
6,100,000
5,250,000
606,000
4,998,400
5,856,000
16,000,000
16,000,000
5,250,000
5,250,000
5,000,000
(c) Cash
Accounts receivable
6,100,000
5,250,000
1,650,000
5,000,000
6,100,000
6,900,000
2011
5,250,000
16,000,000
16,000,000
The following entry would be the only one different from (2).
*
Cost of construction
Construction in progress
2009
4,414,400
545,600
2010
3,821,600
498,400
2011
6,114,000
606,000
Construction revenue
*
4,960,000
4,320,000
6,720,000
(1)
Contract Price
Less: Total Estimated Costs
Cost incurred to date
Estimated costs to complete
Total
Estimated gross profit (loss)
Less: Gross profit (loss) in prior yrs.
Gross profit (loss) this years
(2)
2009
P6,500,000
2010
P6,500,000
2011
P6,500,000
2,150,000
_3,850,000
_6,000,000
500,000
________
P 520,000
5,250,000
_1,500,000
_6,750,000
(250,000)
___520,000
P( 250,000)
6,850,000
________
_6,850,000
(350,000)
_(250,000)
P( 600,000)
197
Problem 10-10
a. Contract price
b. Cost to date
c. ECTC
d. TEC
e. Est. GP
a-d
f. % of comp.
b/d
g. RGP to date
axf
h RGP-prior yr
i RGP this yr
j CITD (b)
k CITD prior yr.
l CITD this yr.
m GP (loss)
Building 1
Prior
To 2011
2011
P4,000,000 P4,000,000
2,070,000
3,000,000
1,380,000
750,000
3,450,000
3,750,000
Building 2
Prior
To 2011
P9,000,000
6,318,0000
1,782,000
8,100,000
Building 3
Prior
2011
To 2011
P9,000,000 P13,150,000
8,118,000
3,000,000
9,000,000
9,118,000
12,000,000
Bldg. 4
2011
P13,150,000
10,400,000
2,800,000
13,200,000
2011
P2,500,000
800,000
1,200,000
2,000,000
550,000
250,000
900,000
882,000
1,150,000
(50,000)
500,000
60%
80%
78%
100%
25%
78.79%
40%
2,400,000
2,400,000
2,070,000
2,070,000
P330,000
3,200,000
2,400,000
800,000
3,000,000
2,070,000
930,000
P(130,000)
7,020,000
7,020,000
6,318,000
6,318,000
P702,000
9,000,000
7,020,000
1,980,000
8,118,000
6,318,000
1,800,000
P180,000
3,287,500
3,287,500
3,000,000
3,000,000
P287,500
10,360,885
3,287,500
7,073,385
10,410,885*
3,000,000
7,410,885
P(337,500)
1,000,000
1,000,000
800,000
800,000
P200,000
Revenue Building 2
Cost Building 2
Gross profit
Less anticipated loss on Building 3
Gross profit
Prior to 2011
P12,707,500
11,388,000
P1,319,500
P9,000,000
8,118,000
P 882,000
( 50,000)
P 832,000
2011
P10,853,385
10,940,885
P (87,500)