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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Diamond Construction which has a calendar year end, has entered into a non-cancellable fixed priced contract of $4,200,000 beginning May 1, 2019 to build a road for a municipality. It has been estimated that the road will be complete by April 2021. The following data pertains to the construction period: 2019 2020 2021 Costs during the year 1,850,000 1,700,000 500,000 Estimated costs to complete 2,050,000 700,000 - Total Required Assuming the company uses the percentage of completion method based on input, calculate and record the revenue and profit for each year (i.e. prepare only the annual journal entry reporting the revenue / profit for the year).
Brainy Company started the construction of a building for a customer at a fixed contract price of P2,000,000 on January 1, 2019. 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 can be estimated reliably except in 2019 which is the start of the project. The company billed the customer equivalent to 30%, 20% and 40% of the contract price during 2019, 2020 and 2021, respectively. The remaining billing was made at the year of completion of the project. The company made collection from the customer at the end of 2019, 2020 and 2021, in the amount of P240,000, P900,000 and P360,000, respectively. Direct costs related to the said project (see image below).1. What is the Percentage of completion in 2020? 2. How much is the Construction Revenue to be recognized in 2020? 3. How much is the Gross Income (Loss) to be recognized in 2021? 4. How much is the balance of Account…
Curtiss Construction Company, Incorporated, entered into a fixed-price contract with Axelrod Associates on July 1, 2024, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,480,000. The building was completed on December 31, 2026. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows: Percentage of completion Costs incurred to date Estimated costs to complete Billings to Axelrod, to date At 12-31-2024 At 12-31-2025 $367,000 3,303,000 728,000 $ 2,856,000 1,904,000 2,330,000 Ren 1 and 2 10% Dan 3 60% Answer is not complete. Complete this question by entering your answers in the tabs below. Required: 1. Compute gross profit or loss to be recognized as a result of this contract for each of the three…
A company has entered a construction contract on 1st January 2019. The contract will take 2 years to complete and the final contract price is OMR 6,000,000. At the end of first year 2019 the company incurred a cost of OMR 2,400,000 and 60% of work has been completed. Certificate for work completed have been issued to the value of OMR 3,600,000. It is estimated that a further cost of OMR1, 600, 000 will be incurred in the year 2020 to complete the contract. You are required to calculate the amount due from customer that will be accounted for the year 2019 a.OMR 3,400,000 b.OMR 3,600,000 c.None of the options d.OMR 3,800,000
Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December 31, 2023. The lease agreement specified annual payments of $32,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2022. The company had the option to purchase the machine on December 30, 2023, for $41,000 when its fair value was expected to be $56,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor’s implicit rate of return was 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Company A entered into a P4,500,000 fixed-price contract with a contractor on March 1, 2019 for the construction of an office building. The building was completed and occupied on September 30, 2020. Additional construction costs were incurred as follows: Plans, specifications and blueprints 18,000 Architect's fees for design and supervision 142,500 The building is estimated to have a 40-year useful life from the date of completion and will be depreciated using the 150%-declining balance method. To finance the construction cost, the company borrowed P4,500,000 on March 1, 2019. The loan is payable in 10 annual installments of P450,000 plus interest at the rate of 10%. The company used part of the loan proceeds for working capital requirements. The Company's average amounts of accumulated building construction expenditures were as follows: For the period March 1 to December 31, 2019 1,350,000 For the period January 1 to September 31, 2020 3,450,000…
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…
Elton Electronics leases testing equipment to Startup Corporation. The equipment is not specialized and is delivered on January 1, 2023. The fair value of the equipment is $118,000. The cost of the equipment to Elton is $113,000 and the expected life of the testing equipment is 8 years. Elton incurs initial direct costs of $10,000, which they elect to expense. The lease term for the equipment is 8 years, with the first payment due upon delivery, and seven subsequent annual payments beginning on December 31, 2023 and ending on December 31, 2029. Elton's implicit rate is 5% and they expect that collection of the $14,500 lease payments is probable.What is the principal balance in the Net Investment in Lease — Sale Type account after the second payment on December 31, 2023? Group of answer choices $98,402 $83,902 $113,000 $73,597
PRIMAX BHD signed a five-year contract to lease a machinery to LM BHD on 1 January 2020. The contract requires LM BHD. to make an annual payment of RM18,000 on the signing date and subsequently on 31 December every year. LM BHD has guaranteed RM8,000 on the residual value. The machinery was purchased by PRIMAX at RM100,000 on 1 January 2019 with an estimated residual value of RM10,000 and useful life of seven years. PRESENT VALUE TABLE i. Assuming the implicit rate is 8 percent, show the journal entry on 1 January 2020 for PRIMAX BHD. ii. Show all the journal entries on 31 December 2020 related to the lease for PRIMAX BHD.
Garnet Corporation enters into a 4-year construction contract worth $100 million with Gold company on January 1, 2022. At the end of 2022, construction costs totaled $20 million and Garnet estimates $60 million of construction costs remain. If Garnet uses the percent of completion method to determine revenues, how much revenue will Garnet recognize in 2022 related to the construction contract?
Big Construction Company signs a contract on 1 July 2019, agreeing to build a warehouse for Buyer Corporation Ltd at a fixed contract price of $10 million. Buyer Ltd will be in control of the asset throughout the construction process. Big Construction Company estimates that construction costs will be as follows: 2019 2.5 million 2020 $4 million 2021 $1.5 million The contract provides that Buyer Corporation Ltd will make payments on 31 December each year as follows: 2019 $2 million 2020 $5 million 2021 $3 million The contract is completed and accepted on 31 December 2021. Assume that actual costs and cash collections coincide with expectations and that cost (an input measure) is used as the basis for assessing progress on the construction contract. Big Construction Company has a financial year ending 31 December. Required: Using the above data, compute the gross profit to be recognised for each of the three…
On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $779,677 and has an expected economic life of five years. Nevels expects the residual value on December 31, 2027, will be $103,000. Negotiations led to the lessee guaranteeing a $146,000 residual value. Equal payments under the lease are $203,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Nguyen is aware that Nevels used a 8% interest rate when calculating lease payments. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2024, to record the lease. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2024, related to the lease.