A Construction Co. entered into a P80M fixed price contract for the construction of a private road. The performance obligation on the contract is satisfied over time. Contractor measures its progress on the contract using the “cost-to-cost” method. The estimated total contract cost is P40M. The following were the actual costs incurred during the first year of the construction: Costs of negotiating the contract (charged immediately as expense) 400,000 Costs of materials used in construction 12,000,000 Costs of materials purchased but not yet used in construction 2,000,000 Site labor costs 4,000,000 Site supervision costs 800,000 Depreciation of equipment used in construction 480,000 Depreciation of idle construction equipment 240,000 Costs of moving plant, equipment, and materials to and from the contract site 160,000 Costs of hiring plant and equipment 560,000 Advance payments to subcontractors (subcontracted work is not yet started) 80,000 What is the percentage of completion of the contract as of the end of the first year?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

A Construction Co. entered into a P80M fixed price contract for the construction of a private road. The performance obligation on the contract is satisfied over time. Contractor measures its progress on the contract using the “cost-to-cost” method. The estimated total contract cost is P40M. The following were the actual costs incurred during the first year of the construction: 

  • Costs of negotiating the contract (charged immediately as expense) 400,000
  • Costs of materials used in construction 12,000,000
  • Costs of materials purchased but not yet used in construction 2,000,000
  • Site labor costs 4,000,000 
  • Site supervision costs 800,000 
  • Depreciation of equipment used in construction 480,000 
  • Depreciation of idle construction equipment 240,000 
  • Costs of moving plant, equipment, and materials to and from the contract site 160,000
  • Costs of hiring plant and equipment 560,000
  • Advance payments to subcontractors (subcontracted work is not yet started) 80,000

What is the percentage of completion of the contract as of the end of the first year?

Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Accounting for Long-Term contracts
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education