On July 1, 2021, Discipline Company obtained a contract to construct a building which is estimated to be built at a total cost of P15M and is scheduled for completion on October 2023. The contract contains a penalty clause to the effect that the party was to deduct P35,000 from the contract price for each week of delay. On the other hand, if the contractor was able to finish the building earlier than agreed, it will be rewarded an amount equal to P50,000 for every month of early completion. Furthermore, cost escalation was included in the contract. In 2022, the estimated costs of a particular construction material amounting to P520,000 were bought for P780,000. The increase in the contract price related to this cost escalation was approved by the client. Completion was delayed for 4 weeks. The records show: 2021 2022 2023 Cost incurred 1,750,000 6,440,000 1,085,000 Estimated cost to complete 7,000,000 1,810,000 Billings to client 1,400,000 15,225,000 4,200,000

On July 1, 2021, Discipline Company obtained a contract to construct a building which is estimated to be built at a total cost of P15M and is scheduled for completion on October 2023. The contract contains a penalty clause to the effect that the party was to deduct P35,000 from the contract price for each week of delay. On the other hand, if the contractor was able to finish the building earlier than agreed, it will be rewarded an amount equal to P50,000 for every month of early completion. Furthermore, cost escalation was included in the contract. In 2022, the estimated costs of a particular construction material amounting to P520,000 were bought for P780,000. The increase in the contract price related to this cost escalation was approved by the client. Completion was delayed for 4 weeks. The records show: 2021 2022 2023 Cost incurred 1,750,000 6,440,000 1,085,000 Estimated cost to complete 7,000,000 1,810,000 Billings to client 1,400,000 15,225,000 4,200,000

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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