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    Let's Analyze-Long Term

    Uploaded by

    Jona Mae Cuarto Ayop
    PP Construction Company has contracted to build an office building from January 2017 to July 2020 for $50 million. The document provides cost and billing information for each year of the construction period and asks the reader to calculate estimated income for each year using the percentage-of-completion method and prepare necessary journal entries for 2019 and 2020. It also presents information on two other construction projects and asks questions about recognizing revenue and calculating costs and profits using the percentage-of-completion method.

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    Let's Analyze-Long Term

    Uploaded by

    Jona Mae Cuarto Ayop
    68 views2 pages
    PP Construction Company has contracted to build an office building from January 2017 to July 2020 for $50 million. The document provides cost and billing information for each year of the construction period and asks the reader to calculate estimated income for each year using the percentage-of-completion method and prepare necessary journal entries for 2019 and 2020. It also presents information on two other construction projects and asks questions about recognizing revenue and calculating costs and profits using the percentage-of-completion method.

    Original Title

    Let's Analyze-Long term

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    PP Construction Company has contracted to build an office building from January 2017 to July 2020 for $50 million. The document provides cost and billing information for each year of the construction period and asks the reader to calculate estimated income for each year using the percentage-of-completion method and prepare necessary journal entries for 2019 and 2020. It also presents information on two other construction projects and asks questions about recognizing revenue and calculating costs and profits using the percentage-of-completion method.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    68 views2 pages

    Let's Analyze-Long Term

    Uploaded by

    Jona Mae Cuarto Ayop
    PP Construction Company has contracted to build an office building from January 2017 to July 2020 for $50 million. The document provides cost and billing information for each year of the construction period and asks the reader to calculate estimated income for each year using the percentage-of-completion method and prepare necessary journal entries for 2019 and 2020. It also presents information on two other construction projects and asks questions about recognizing revenue and calculating costs and profits using the percentage-of-completion method.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Let’s Analyze

    Activity 1.

    PP Construction Company has contracted to build an office building. construction is scheduled to begin
    on January 1, 2017, and the estimated time of completion is July l, 2020. The building cost is estimated
    to be P50,000,000 and this will be billed at P 55,000,000. The following data relate to the construction
    period.
    2017 2018 2019 2020
    Cost to date P15,000,000 P25,000,000 P35,000,000 P50,000,00
    Estimated cost to complete 35,000,000 25,000,000 15,000,000 -
    Progress billings to date 7,000,000 20,000,000 35,000,000 55,000,000
    Cash collected to date 7,000,000. 18,000.000 30.000,000 55,000,000
    Required:
    a. Compute the estimated income for 2017, 2018, 2019, 2020, assuming that the percentage-of-
    completion method is used.
    b. Prepare the necessary journal entries for PP Construction Company for the year 2019 and 2020.
    Activity 2.

    The Builders Construction Company contracted to construct a building for Construction began in 2019
    and the project was completed in 2020. Cost information for the project is as follows:

    2019 2020
    Costs incurred P200,000 P120,000
    Estimated costs to complete 100,000 -
    Builders uses the percentage-of-completion method for recognizing income on the contract.
    Required:
    a) Determine the amount of income that the company should recognize in 2019 and 2020.
    b) Prove the amount of income you have computed in (a) by computing the total income on the
    contract and comparing it with the incomes you have computed in 2019 and 2020.
    c) Prepare the journal entries required at the end of each year to recognize that years income.
    Activity 3.
    Smokey Mountain Inc. recently acquired the Triple A Builders Company. Triple A has incomplete
    accounting records. On one particular project, only the information is available.

    2018 2019 2020


    Cost incurred during year P200,000 P250,000 ?
    Estimated costs to complete 450,000 190,000 P0
    Recognize revenue 220,000 ? ?
    Estimated gross profit (loss) 10,000 (10.000)
    Contract price 850,000
    Because the information is incomplete, you are asked the following questions assuming the percentage
    of completion method is used, an output measure is used to estimate the percentage of completion, and
    revenue is recorded using the actual cost approach.
    Required:
    1. How much gross profit should be reported in 2018?
    2. How much revenue should be reported in 2019?
    3. How much revenue should be reported in 2016?
    4. How much cost was incurred in 2016?
    5. What are the total costs on the contract?
    6. What would be the gross profit for 2019 if the cost-to-cost percentage-of-completion method was
    used rather than the output measure? (Hint: Ignore the revenue amount shown for 2018 and gross
    profit amount reported for 2019.)

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