Yellow. Arrow Construction. Co. has consistently used the percentage-of-completion method of recognizing revenue. During 2018, Yellow Arrow entered into a fixed-price contract to construction an office bundling for P12,000,000. Information relating to the contract is as follows: At December 31 2018 2019 Percentage of completion Estimated total cost at completion Gross profit recognized (cumulative) 15% 45% P9,000,000 600,000 P9,600,000 1,440,000 How much is the contract costs incurred during 2019?

Yellow. Arrow Construction. Co. has consistently used the percentage-of-completion method of recognizing revenue. During 2018, Yellow Arrow entered into a fixed-price contract to construction an office bundling for P12,000,000. Information relating to the contract is as follows: At December 31 2018 2019 Percentage of completion Estimated total cost at completion Gross profit recognized (cumulative) 15% 45% P9,000,000 600,000 P9,600,000 1,440,000 How much is the contract costs incurred during 2019?

FINANCIAL ACCOUNTING

10th Edition

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

Yellow. Arrow Construction. Co. has consistently used the percentage-of-completion method of recognizing
revenue. During 2018, Yellow Arrow entered into a fixed-price contract to construction an office bundling for
P12,000,000. Information relating to the contract is as follows:
At December 31
2018
2019
15%
45%
Percentage of completion
Estimated total cost at completion
Gross profit recognized (cumulative)
P9,600,000
P9,000,000
600,000
1,440,000
How much is the contract costs incurred during 2019?

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