DMCI entered into a fixed price contract for the construction of a road for Camella Corp. DMCI determines thestage of completion of construction contracts using the "cost to cost method". The estimated total contract cost isP50 million. The following were the total actual costs incurred by DMCI during the first year of the construction:Cost of negotiating the contract (charge immediately as expense)500,000Costs of hiring equipment700,000Costs of materials purchased but not yet used in construction2,500,000Costs of materials used in construction15,000,000Costs of moving plant, equipment and materials to and from the200,000contract siteDepreciation of equipment used in construction600,000Depreciation of idle construction equipment300,000Site labor costs5,000,000Site supervision costs1,000,000How much is the cost incurred to date?

In this question, we have to find out the total cost to be incurred by DMCI during the first year of…

stage of completion of construction contracts using the "cost to cost method". The estimated total contract P50 million. The following were the total actual costs incurred by DMCI during the first year of the construc

stage of completion of construction contracts using the "cost to cost method". The estimated total contract P50 million. The following were the total actual costs incurred by DMCI during the first year of the construc

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: 29) Horner Construction uses the method. In percentage-of-completion 2024, Honer began work on a…

A: The gross profit is calculated as the difference between the revenue and cost of goods sold. The…

Q: Calculate the amount of construction costs incurred during 2022.

A: Percentage-of-completion method is used for revenue recognition in case of construction…

Q: Concord Corp. contracted to construct a building for $729000. Construction began in 2023 and was…

A: Some people and companies are doing the business of construction such as building, flats, roads,…

Q: Assume that Sunland Construction Company has a non-cancellable contract to construct a $4,520,000…

A: Journal entry is a primary entry that records the financial transactions initially. The transactions…

Q: a. Rattan commenced a contract to build an asset for a customer in the year ended 30 September 20X4.…

A: The cost of each contract is computed individually and a different account is opened for each…

Q: Rice Corp. recognizes revenue over time to account for long-term contracts and has the following…

A: The revenue under contract costs is recognized on the basis of degree of completion. Degree of…

Q: On February 1, 2020, Mar Contractors agreed to construct a building at a contract price of…

Q: Thrasher Construction Co. was contracted to construct a building for $1,045,000. The building is…

A: The following requirements have been answered in the following steps :Journal entriesStatement of…

Q: Question. Prepare a partial balance sheet to indicate how the above contract information would be…

A: Construction company used contract accounting techniques for maintaining its books of accounts in…

Q: In a construction contract assigned to a contractor, according to the table shown below. The…

A: The construction contract pricing comprises the cost of the direct project including field…

Q: Which of the following should be shown on the statement of financial position at December 31, 2023…

A: It is a method used for accounting for construction contracts. In this approach, revenue is…

Q: 4SMC entered into a long-term construction contract for 3 years. Contract price agreed was…

A: When the outcome of a construction contract can be estimated reliably, contract revenue and contract…

Q: Prepare a schedule showing the profit to be recognized each year. Prepare all journal entries…

Q: The Leto Construction Company began work on a $12.000 contract on 1/1/20. Planned completion was in…

A: Construction in progress is equal to the contract value multiplied by the percentage of completion.…

Q: M. 00 00 at of. Use the following information for the next two questions: Co. appropriately on a…

A: Cost-to-cost method :The cost-to-cost method is a way to recognize revenue and profit in long-term…

Q: Assume that Sunland Construction Company has a non-cancellable contract to construct a $4,520,000…

A: The percentage of completion method determines the estimated amount of revenue earned with respect…

Q: In accounting for construction contracts using the percentage of completion method, the gross profit…

A: Using percentage method, the gross profit is recognised on the basis of percentage of the work…

Q: Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,860,000.…

A: The question is based on the concept of Financial Accounting. As per the Bartleby guidelines we are…

Q: A construction company entered into a fixed-price contract to build an office building for $30…

A: Introduction: In the percentage completion method, revenue is recognized based on the percentage of…

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

DMCI entered into a fixed price contract for the construction of a road for Camella Corp. DMCI determines the
stage of completion of construction contracts using the "cost to cost method". The estimated total contract cost is
P50 million. The following were the total actual costs incurred by DMCI during the first year of the construction:
Cost of negotiating the contract (charge immediately as expense)
500,000
Costs of hiring equipment
700,000
Costs of materials purchased but not yet used in construction
2,500,000
Costs of materials used in construction
15,000,000
Costs of moving plant, equipment and materials to and from the
200,000
contract site
Depreciation of equipment used in construction
600,000
Depreciation of idle construction equipment
300,000
Site labor costs
5,000,000
Site supervision costs
1,000,000
How much is the cost incurred to date?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Using completed-contract method: Record the journal entries for ACE corporation for 2001, 2002, and 2003 Record the partial balance sheet for 2003 for just the Asset section in a A. В. suitable format ACE Construction Corporation Contract Price: $1,500,000 2001 2002 2003 Costs incurred during the current year Estimated costs to complete at year-end 1,000,000 Progress billings during year Collections on billings during the year $1,350,000 $1,360,000 460,000 575,000 555,000 $1,365,000 300,000 270,000 625,000 675,000
Bank Al-Izz provided working capital to Tijarah Construction. based on the principle of musharakah mutanaqisah amounting to OR 400,000. Profit and loss sharing ratio as agreed by both parties is similar to the ratio of capital contribution which is 40:60 (Bank: Customer) at the beginning of the contract. The repayment shall be equal throughout the contract period. The profit and loss for the above project is as follows: Year 1 Loss of OR 180,000 Year 2 Profit of OR 150,000 Year 3 Profit of OR 220,000 Year 4 Loss of OR 80,000 Determine the profits or losses to be recognised by Bank Al-Izz for Year 1 Year 2 Year 3 Year 4
On September 1, 20x1, ABC Co. enters into a contract with a customer to remodel a plant's electrical wirings and install a new generator for a total consideration of P10M. The remodeling and the installation single performance obligation treated as a satisfied over time. The expected contract costs Generator LO as follows: Other costs Expected total contract costs 2,500,000 4,000,000 6,500,000 VERSITY Additional information: • ABC Co. uses the cost-to-cost method in measuring its progress towards the complete satisfaction of the performance obligation. • ABC Co. incurs total costs of P4,000,000 in 20x1, including the cost of the generator. The customer obtains control of the generator when it is delivered to the site in December 20x1. However, the generator will not be installed until March 20x2. • • ABC Co. regards the cost of the generator as significant in relation to the expected total contract costs-eating during examinations, quizzes or plagiarism in connection . Although ABC Co.…
Thrasher Construction Co. was contracted to construct a building for $1,045,000. The building is owned by the customer throughout the contract period. The contract provides for progress payments. Thrasher's accounting year ends 31 December. Work began under the contract on 1 July 20X5, and was completed on 30 September 20X7. Construction activities are summarized below by year: 20X5 Construction costs incurred during the year, $192,600; estimated costs to complete, $674,100; progress billings during the year, $163,500; and collections, $149,800. 20x6 Construction costs incurred during the year, $481,500; estimated costs to complete, $203,300; progress billing during the year, $409,100; and collections, $406,600. 20X7 Construction costs incurred during the year, $209,000. Because the contract was completed, the remaining balance was billed and later collected in full per the contract. Required: 1. Prepare Thrasher's journal entries to record these events. Assume that percentage of…
M5-13. Computing Revenues under Long-Term Contracts Camden Corporation agreed to build a warehouse for a client at an agreed contract price of $900,000. Ex- pected (and actual) costs for the warehouse follow: 2016, $202,500; 2017, $337,500; and 2018, $135,000. The company completed the warehouse in 2018. Compute revenues, expenses, and income for each year 2016 through 2018, and for all three years combined, using the cost-to-cost method.