On January 1, 2018, Liquid Company accepted a long-term construction project for an initialcontract price ofP2,000,000 to be completed on June 30, 2020. On January 1, 2019, the contractprice was increased toP3,000,000 by reason of change in the design of the project. The outcomeof the construction contract can be estimated reliably. The project was completed on December31, 2020 which resulted to penalty amounting toP400,000. The entity provided the following dataconcerning the direct costs related to the said project for 2018and 2019:20182019Costs during the year880,0001,360,000Remaining estimated costs to complete at year-end1,320,000560,000What is the construction revenue for the year ended December 31, 2018?

Revenue earned from state and local taxes imposed on transactions happening during the eligibility…

On January 1, 2018, Liquid Company accepted a long-term construction project for an ini contract price ofP2,000,000 to be completed on June 30, 2020. On January 1, 2019, the contr. price was increased toP3,000,000 by reason of change in the design of the project. The outcor of the construction contract can be estimated reliably. The project was completed on Decemb 31, 2020 which resulted to penalty amounting toP400,000. The entity provided the following da concerning the direct costs related to the said project for 2018and 2019: 2018 2019 Costs during the year 880,000 1,360,000 Remaining estimated costs to complete at year-end 1,320,000 560,000

On January 1, 2018, Liquid Company accepted a long-term construction project for an ini contract price ofP2,000,000 to be completed on June 30, 2020. On January 1, 2019, the contr. price was increased toP3,000,000 by reason of change in the design of the project. The outcor of the construction contract can be estimated reliably. The project was completed on Decemb 31, 2020 which resulted to penalty amounting toP400,000. The entity provided the following da concerning the direct costs related to the said project for 2018and 2019: 2018 2019 Costs during the year 880,000 1,360,000 Remaining estimated costs to complete at year-end 1,320,000 560,000

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

On January 1, 2018, Liquid Company accepted a long-term construction project for an initial
contract price ofP2,000,000 to be completed on June 30, 2020. On January 1, 2019, the contract
price was increased toP3,000,000 by reason of change in the design of the project. The outcome
of the construction contract can be estimated reliably. The project was completed on December
31, 2020 which resulted to penalty amounting toP400,000. The entity provided the following data
concerning the direct costs related to the said project for 2018and 2019:
2018
2019
Costs during the year
880,000
1,360,000
Remaining estimated costs to complete at year-end
1,320,000
560,000
What is the construction revenue for the year ended December 31, 2018?

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