Holcim-Union Construction accepted a contract with a cost escalation clause. Construction data were as follows: Contract price Cost incurred Estimated cost to complete 2013 P 900,000 200,000 400,000 2014 P 1,080,000 600,000 100,000

Holcim-Union Construction accepted a contract with a cost escalation clause. Construction data were as follows: Contract price Cost incurred Estimated cost to complete 2013 P 900,000 200,000 400,000 2014 P 1,080,000 600,000 100,000

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

Using percentage of completion cost to cost input measure the gross profit in 2014 is

a. P 60,000
b. P 74, 429
c. P 160,000
d. P 225,714

Holcim-Union Construction accepted a contract with a cost escalation clause. Construction data
were as follows:
Contract price
Cost incurred
Estimated cost to complete
2013
P 900,000
200,000
400,000
2014
P 1,080,000
600,000
100,000

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