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No.1 In 20x1. ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs incurred plus 20% thereof. However, if the Project is completed within 4 years, ABC will receive an additional payment of P200.000. Information on the project is shown below: 20x1 20x2 20x3 Costs incurred to date 2.400.000 4.575.000 6.125.000 Estimated costs to complete 3.600.000 1.525.000 125.000 In 20x1 and 20x2. it was not highly probable that the project will be completed on time. However. in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received. How much profit is recognized on the contract in 20x3? o 595,000 o 634,000 506,000 603,000

No.1 In 20x1. ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs incurred plus 20% thereof. However, if the Project is completed within 4 years, ABC will receive an additional payment of P200.000. Information on the project is shown below: 20x1 20x2 20x3 Costs incurred to date 2.400.000 4.575.000 6.125.000 Estimated costs to complete 3.600.000 1.525.000 125.000 In 20x1 and 20x2. it was not highly probable that the project will be completed on time. However. in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received. How much profit is recognized on the contract in 20x3? o 595,000 o 634,000 506,000 603,000

FINANCIAL ACCOUNTING
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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No.1 In 20x1. ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs incurred plus 20% thereof. However, if the Project is completed within 4 years, ABC will receive an additional payment of P200.000. Information on the project is shown below: 20x1 20x2 20x3 Costs incurred to date 2.400.000 4.575.000 6.125.000 Estimated costs to complete 3.600.000 1.525.000 125.000 In 20x1 and 20x2. it was not highly probable that the project will be completed on time. However. in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received. How much profit is recognized on the contract in 20x3? 595,000 634,000 506,000 603,000
Transcribed Image Text:No.1 In 20x1. ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs incurred plus 20% thereof. However, if the Project is completed within 4 years, ABC will receive an additional payment of P200.000. Information on the project is shown below: 20x1 20x2 20x3 Costs incurred to date 2.400.000 4.575.000 6.125.000 Estimated costs to complete 3.600.000 1.525.000 125.000 In 20x1 and 20x2. it was not highly probable that the project will be completed on time. However. in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received. How much profit is recognized on the contract in 20x3? 595,000 634,000 506,000 603,000
No.2 In 20x1, Gorgeous Too Co. enters into a fixed-price construction contract with a customer. At contract inception, Gorgeous Too Co. assesses its performance obligations in the contract and concludes that it has a single performance obligation that is satisfied over Ave. Gorgeous Too Co. determines that the measure of progress that best depicts its performance on the contract is input method based on costs incurred. Information on the contract follows: 20x1 20x2 Cumulative contract costs incurred 2.250.000 4,800,000 Cumulative profits recognized 750.000 1,200.000 Progress billings 2,400.000 3,600,000 Collections on progress billings 2,000,000 4.000,000 The contract is completed in 20x2. How much is the transaction price in the contract? o 9.000,000 o 5,00,000 7.000.000 6.000.000 No.3 In 20x1. Salamagi Co. entered into a contract with a customer. The contract stipulates the following: • Contract price of P20,000.000 • 5% mobilization fee due upon signing of the contract, to be deducted from the final billing
Transcribed Image Text:No.2 In 20x1, Gorgeous Too Co. enters into a fixed-price construction contract with a customer. At contract inception, Gorgeous Too Co. assesses its performance obligations in the contract and concludes that it has a single performance obligation that is satisfied over Ave. Gorgeous Too Co. determines that the measure of progress that best depicts its performance on the contract is input method based on costs incurred. Information on the contract follows: 20x1 20x2 Cumulative contract costs incurred 2.250.000 4,800,000 Cumulative profits recognized 750.000 1,200.000 Progress billings 2,400.000 3,600,000 Collections on progress billings 2,000,000 4.000,000 The contract is completed in 20x2. How much is the transaction price in the contract? o 9.000,000 o 5,00,000 7.000.000 6.000.000 No.3 In 20x1. Salamagi Co. entered into a contract with a customer. The contract stipulates the following: • Contract price of P20,000.000 • 5% mobilization fee due upon signing of the contract, to be deducted from the final billing
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