What is the percentage of completion of the contract as of the end of the first year? VALEDICTION Construction Co. entered into a P8OM fixed price contract for the construction of a private road for FAREWELL SPEECH, Inc. The performance obligation on the contract is satisfied over time. VALEDICTION measures its progress on the contract using the "cost-to-cost" method. The estimated total contract cost is P40M. The following were the actual costs incurred by VALEDICTION during the first year of the construction: Costs of negotiating the contract (charged immediately as expense) 400,000 Costs of materials used in construction 12,000,000 Costs of materials purchased but not yet used in construction 2,000,000 Site labor costs 4,000,000 Site supervision costs Depreciation of equipment used in construction Depreciation of idle construction equipment Costs of moving plant, equipment and materials to and from the contract site Costs of hiring plant and equipment Advance payments to subcontractors (subcontracted work is not yet started) 800,000 480,000 240,000 160,000 560,000 80,000 42%

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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What is the percentage of
completion of the contract as of
the end of the first year?
VALEDICTION Construction Co. entered into a P80M fixed price contract for the construction of a
private road for FAREWELL SPEECH, Inc. The performance obligation on the contract is satisfied
over time. VALEDICTION measures its progress on the contract using the "cost-to-cost" method.
The estimated total contract cost is P40M. The following were the actual costs incurred by
VALEDICTION during the first year of the construction:
Costs of negotiating the contract (charged immediately as expense)
400,000
Costs of materials used in construction
12,000,000
Costs of materials purchased but not yet used in construction
Site labor costs
2,000,000
4,000,000
800,000
Site supervision costs
Depreciation of equipment used in construction
Depreciation of idle construction equipment
Costs of moving plant, equipment and materials to and from the contract site
Costs of hiring plant and equipment
Advance payments to subcontractors (subcontracted work is not yet started)
480,000
240,000
160,000
560,000
80,000
42%
45%
46%
50%
Transcribed Image Text:What is the percentage of completion of the contract as of the end of the first year? VALEDICTION Construction Co. entered into a P80M fixed price contract for the construction of a private road for FAREWELL SPEECH, Inc. The performance obligation on the contract is satisfied over time. VALEDICTION measures its progress on the contract using the "cost-to-cost" method. The estimated total contract cost is P40M. The following were the actual costs incurred by VALEDICTION during the first year of the construction: Costs of negotiating the contract (charged immediately as expense) 400,000 Costs of materials used in construction 12,000,000 Costs of materials purchased but not yet used in construction Site labor costs 2,000,000 4,000,000 800,000 Site supervision costs Depreciation of equipment used in construction Depreciation of idle construction equipment Costs of moving plant, equipment and materials to and from the contract site Costs of hiring plant and equipment Advance payments to subcontractors (subcontracted work is not yet started) 480,000 240,000 160,000 560,000 80,000 42% 45% 46% 50%
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