Answered: Chan Builders Inc entered into a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Chan Builders Inc entered into a contract with George Company to construct a production plant. At that time, Chan Builders estimated that it would take five years to complete the facility at a total cost of P28,800,000. Chan Builders therefore, pegged the total contract price for the construction of the facility at P34,800,000. During 2010, Chan Builders incurred P7,500,000 in construction costs related to the project. Because of rising material and labor costs, the estimated cost to complete the contract at the end of 2010 amounted to P22,500,000. George was billed and paid 30% on the contract price in accordance with the contract agreement. Compute the Contract Asset (Contract Liability) for 2010.

George Co. enters into a contract to build an apartment for Jungle Co. for a fixed fee of ₱20,000,000. At contract inception, George Co. assesses its performance obligations in the contract and concludes that it has a single performance obligation that is satisfied over time. George Co. determines that the measure of progress that best depicts its performance in the contract is input method based on costs incurred. George estimates that the total contract costs would amount to ₱16,000,000 over the construction period. George incurs contract costs of ₱2,000,000 during the year. How much gross profit is recognized for the year?

On Oct. 1, 20x1, ABC Co. enters into a construction contract with a customer. The performance obligation in the contract will be satisfied over time. ABC Co. uses the “cost-to-cost” method in measuring its progress. The estimated total contract cost is ₱10M. In 20x1, ABC Co. incurred a total cost of ₱6M, which includes ₱2M advance payment to a subcontractor (the subcontracted work is not yet started) and ₱200,000 cost of materials not yet installed. ABC Co. does not regard the cost of the unused materials as significant in relation to the expected total contract costs. Moreover, ABC Co. retains control over the unused materials because it can use them in a contract with another customer. What is the percentage of completion in 20x1?

Schindler Co. consigns 20 water heaters to Paralax Co. on January 1, 20x1. The unit cost per water
heater is P10,000. Schindler pays P3,000 in transporting the water heaters to Paralax. At month-end,
Paralax remits P232,000 for the sale of 16 water heaters, after deduction for the following:
20% commission based on selling price
Freight out
P16,000
Installation costs
P 8,000
How much is the commission?

Aircon, Inc. consigned ten one-horsepower air conditioning units to Argy Trading and paid
P2,000 for the freight. The consignee is allowed a commission of 5% on sales. Argy Trading
submitted the following report at the end of the period:
Sales (6 units)
72,000
Less: Advances to Aircon, Inc.
10,000
Selling expenses
Installation and delivery
800
1,200
7,200
Commission
19,200
Net remittance
52,800
The selling expenses and the installation and delivery costs are chargeable to Aircon. Aircon
consistently marks-up its inventories at a 12.50% gross profit rate based on sales price. This does
not reflect any freight. How much is the cost of the inventory after the consignment sale?

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