Galaxy Corp. recognizes construction revenue and expenses using the percentage-of-completion method. During 2012, a single long-term project was begun, which continued through 2013. Annual Information on the project follows: Accounts receivable from construction contract Construction expenses Construction in progress Partial Billings on contract 2012 Php200,000 210,000 244,000 200,000 2013 Php600,000 384,000 728,000 840,000

Galaxy Corp. recognizes construction revenue and expenses using the percentage-of-completion method. During 2012, a single long-term project was begun, which continued through 2013. Annual Information on the project follows: Accounts receivable from construction contract Construction expenses Construction in progress Partial Billings on contract 2012 Php200,000 210,000 244,000 200,000 2013 Php600,000 384,000 728,000 840,000

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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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Profit recognized from the long-term construction in 2013 should be:

a. P344,000
b. P310,000
c. P100,000
d. P134,000

Galaxy Corp. recognizes construction revenue and expenses using the percentage-of-completion
method. During 2012, a single long-term project was begun, which continued through 2013.
Annual Information on the project follows:
Accounts receivable from construction contract
Construction expenses
Construction in progress
Partial Billings on contract
2012
Php200,000
210,000
244,000
200,000
2013
Php600,000
384,000
728,000
840,000

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