On January 1, 2018, DMCI Company started the construction of a building at a fixed contract priceofP1,000,000. On the same date, the customer paid a mobilization fee equal to 5% of contractprice that will be deductible from the first billing. The outcome of construction contract cannotbe estimated reliablyDuring 2018, the entity billed the customer equivalent to 30% of the contract price. During 2019,the entity billed again the customer amounting to 20% of the contract price. During 2020, theentity billed again the customer amounting to 40% of the contract price. The remaining billing wasmade at the year of completion of the project.The entity made collection from the customer at the end of 2018, 2019 and 2020, in the amountof P120,000, P450,000 and P180,000, respectively. The entity provided the following dataconcerning the direct costs related to the said project:201820192020Cumulative costs incurred at year-end360,000800,000870,000Remaining estimated costs to complete at year-end840,000250,00050,000What is the realized gross profit for the year ended December 31, 2019?• 0150,000200,00050,000What is the excess of construction in progress over progress billings or excess of progress billingsover construction in progress on December 31, 2020?• 50,000 excess construction in progress30,000 excess billings80,000 excess billings20,000 excess construction in progressWhat is the balance of accounts receivable on December 31, 2020?150,000120,000100,00050,000

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omer equivalent to 30% of the contract price. D mounting to 20% of the contract price. Durin ting to 40% of the contract price. The remainin project. astomer at the end of 2018, 2019 and 2020, in ɔ, respectively. The entity provided the foll

omer equivalent to 30% of the contract price. D mounting to 20% of the contract price. Durin ting to 40% of the contract price. The remainin project. astomer at the end of 2018, 2019 and 2020, in ɔ, respectively. The entity provided the foll

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

On January 1, 2018, DMCI Company started the construction of a building at a fixed contract price
ofP1,000,000. On the same date, the customer paid a mobilization fee equal to 5% of contract
price that will be deductible from the first billing. The outcome of construction contract cannot
be estimated reliably
During 2018, the entity billed the customer equivalent to 30% of the contract price. During 2019,
the entity billed again the customer amounting to 20% of the contract price. During 2020, the
entity billed again the customer amounting to 40% of the contract price. The remaining billing was
made at the year of completion of the project.
The entity made collection from the customer at the end of 2018, 2019 and 2020, in the amount
of P120,000, P450,000 and P180,000, respectively. The entity provided the following data
concerning the direct costs related to the said project:
2018
2019
2020
Cumulative costs incurred at year-end
360,000
800,000
870,000
Remaining estimated costs to complete at year-end
840,000
250,000
50,000
What is the realized gross profit for the year ended December 31, 2019?
• 0
150,000
200,000
50,000
What is the excess of construction in progress over progress billings or excess of progress billings
over construction in progress on December 31, 2020?
• 50,000 excess construction in progress
30,000 excess billings
80,000 excess billings
20,000 excess construction in progress
What is the balance of accounts receivable on December 31, 2020?
150,000
120,000
100,000
50,000

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