On January 1, 2021, MARCOS Company entered into a contract for the construction of a building at an original price of P2,000,000 to be completed on June 30, 2023 subject to penalty of P500,000 on the it becomes virtually certain that construction will not be completed on the date agreed upon. On January 1, 2022, the contract price increased by P2,500,000 due to the change in the design of the building requested by the customer. year 12/31/2021 12/31/2022 12/31/2023 Cumulative costs incurred as of the end of the year Estimated remaining cost to complete at the end of the year 600,000 900,000 3,075,000 1,025,000 3,780,000 420,000 What is the realized gross profit (loss) to be recognized by MARCOS Company for the year ended December 31, 2023 if the outcome of construction can be estimated reliably?

On January 1, 2021, MARCOS Company entered into a contract for the construction of a building at an original price of P2,000,000 to be completed on June 30, 2023 subject to penalty of P500,000 on the it becomes virtually certain that construction will not be completed on the date agreed upon. On January 1, 2022, the contract price increased by P2,500,000 due to the change in the design of the building requested by the customer. year 12/31/2021 12/31/2022 12/31/2023 Cumulative costs incurred as of the end of the year Estimated remaining cost to complete at the end of the year 600,000 900,000 3,075,000 1,025,000 3,780,000 420,000 What is the realized gross profit (loss) to be recognized by MARCOS Company for the year ended December 31, 2023 if the outcome of construction can be estimated reliably?

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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

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On January 1, 2021, MARCOS Company entered into a contract for the construction of a building at an
original price of P2,000,000 to be completed on June 30, 2023 subject to penalty of P500,000 on the year
it becomes virtually certain that construction will not be completed on the date agreed upon. On January 1,
2022, the contract price increased by P2,500,000 due to the change in the design of the building requested
by the customer.
12/31/2021 12/31/2022 12/31/2023
Cumulative costs incurred as of the end of the year
600,000
900,000
3,075,000
1,025,000
3,780,000
420,000
Estimated remaining cost to complete at the end of the year
What is the realized gross profit (loss) to be recognized by MARCOS Company for the year ended December 31, 2023 if the
outcome of construction can be estimated reliably?

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