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BAPE 6 (SY 2024-25)

ADVACC1 LONG QUIZ #3
QUESTIONNAIRE
SET A
Instructions:
 Use black ink pen only to fill in the bubbles in the answer sheet. Students are to record their
answers to the multiple-choice items on the front of the answer sheet by completely filling in
one of the five bubbles available for each item. NO ERASURES.
 Make sure that the question number from the Examination Booklet corresponds with the same
number on the Bubble Sheet. Shade only one circle for each question.
 Read each question very carefully. Strictly NO CHEATING. NO CHATTING. Violation of said
prohibitions will automatically forfeit your exam.
 This test was developed to be completed in EIGHTY MINUTES ONLY.
Important reminders in filling out the ANSWER SHEET
1. Strictly no erasures, no frixion pen; BLACK INK PEN only.
2. Shade the Exam Set letter corresponding your questionnaire
3. In filling in your name, follow the following format: (LAST NAME, FIRST NAME, MIDDLE INITIAL)
Yun lang, padayon mga accrued CPAs!
_____________________________________________________________________________________
Fact pattern for the next two items:
An entity is developing a multi-unit residential complex. A customer enters into a binding sales contract
with the entity for a specified unit that is under construction. Each unit has a similar floor plan and is of a
similar size, but other attributes of the units are different (for example, the location of the unit within
the complex).

1. The customer pays a deposit upon entering into the contract and the deposit is refundable only if the
entity fails to complete construction of the unit in accordance with the contract. The remainder of the
contract price is payable on completion of the contract when the customer obtains physical possession
of the unit. If the customer defaults on the contract before completion of the unit, the entity only has
the right to retain the deposit. Which of the following statements is correct?

A. The entity’s performance obligation is satisfied at a point in time because the entity does not
have an enforceable right to payment for performance completed to date.
B. The entity’s performance obligation is satisfied over time because the contract is a construction
contract.
C. The entity’s performance obligation is satisfied at a point in time because it takes a short period
of time to construct just one unit in a multi-unit complex.
D. The entity’s performance obligation is satisfied over time because it takes a long-period of time
to develop all the units in the multi-unit residential complex.

2. The customer pays a non-refundable deposit upon entering into the contract and will make progress
payments during construction of the unit. The contract has substantive terms that preclude the entity
from being able to direct the unit to another customer. In addition, the customer does not have the right
to terminate the contract unless the entity fails to perform as promised. If the customer defaults on its
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obligations by failing to make the promised progress payments as and when they are due, the entity
would have a right to all of the consideration promised in the contract if it completes the construction of
the unit. The courts have previously upheld similar rights that entitle developers to require the customer
to perform, subject to the entity meeting its obligations under the contract. Which of the following
statements is correct?

A. The asset (unit) created by the entity’s performance does not have an alternative use to the
entity.
B. The entity has a right to payment for performance completed to date.
C. The entity’s performance obligation is satisfied over time.
D. All of these

Use the following information for the next two questions:

On July 1, 2021, ABC Construction Inc. contracted to build an office building for XYZ Co. for a total
contract price of P975,000.

3. Under the percentage of completion method, how much is the Construction-in-Progress at December
31, 2022?

A. 650,000
B. 575,000
C. 672,500
D. 597,500
4. Under the zero-profit method, how much is the Construction-in-Progress, net of Progress Billings at
December 31, 2022

A. (125,000)
B. 125,000
C. 50,000
D. (50,000)

Use the following information for the next two questions:

At the beginning of 2024, the company enters into a contract to build an establishment for a client. The
contract price (CP) for the said establishment is P8,000,000. The client has given the company until the
end of 2026 to finish the establishment. The following data were ascertained:

5. Under IFRS 15, what is the realized gross profit/(loss) for the year ended December 31, 2024?
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A. 1,750,000
B. 1,700,000
C. 700,000
D. 2,200,000

6. Under IFRS 15, what is the construction-in-progress as of December 31, 2025?

A. 9,600,000
B. 6,400,000
C. 7,100,000
D. 8,900,000

7. Contract revenue in construction contract comprises

A. The initial amount of revenue agreed in the contract.

B. Variation in contract work, claim and incentive payment.
C. The initial amount of revenue agreed in the contract, variation in contract work, claim and
incentive payment.
D. The initial amount of revenue agreed in the contract and progress billings.

8. On Oct. 1, 20x1, ABC Co. enters into a construction contract with a customer. The performance
obligation in the contract will be satisfied over time. ABC Co. uses the “cost-to-cost” method in
measuring its progress. The estimated total contract cost is ₱10M. In 20x1, ABC Co. incurred a total cost
of ₱6M, which includes ₱2M advance payment to a subcontractor (the subcontracted work is not yet
started) and ₱200,000 cost of materials not yet installed. ABC Co. does not regard the cost of the unused
materials as significant in relation to the expected total contract costs. Moreover, ABC Co. retains control
over the unused materials because it can use them in a contract with another customer. What is the
percentage of completion in 20x1?

A. 38%
B. 40%
C. 42%
D. 56%

9. According to PFRS 15, how does an entity account for a promise in the contract to transfer a good or
service that is not distinct?

A. The entity shall not recognize any revenue from the promise to transfer a non-distinct good or
service; any consideration received therefrom is treated as a liability.
B. The entity shall recognize revenue from a promise to transfer a non-distinct good or service at
the earlier of the following events: the entity has no remaining obligation in the contract and the
contract is terminated and the consideration received is non-refundable.
C. The entity shall combine the non-distinct good or service with the other promises in the contract
and treat the combined promises as a single performance obligation.
D. The entity shall ignore the promise to transfer a non-distinct good or service and shall account
only those promises in the contract to transfer distinct goods or services.
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10. Sheldon Cooper Inverters, Inc. consigned its products with total retail price of P432,000 and paid
P7,200 for the freight-out, which is based on five per cent of the cost of the consigned products.
Consignee is entitled to a five percent commission and has incurred reimbursable period expenses
amounting to P21,600. As part of the agreement, the consignor needs to draw a sight draft amounting to
P60,000. The advance is recoverable periodically by monthly deductions (in proportion to the units sold)
from the remittances. The consignor reported profit of P120,960. How much did the consignee remit?

A. 4,800,000
B. 2,400,000
C. 2,976,000
D. 3,264,000

11. On January 1, 2021, an entity accepted a long-term construction project for an initial contract price
of P1,000,000 to be completed on June 30, 2023. On January 1, 2022, the contract price was increased
to P1,500,000 by reason of change in the design of the project. The project was completed on December
31, 2023 which resulted to penalty amounting to P200,000. The outcome of the construction contract
can be estimated reliably.

The entity provided the following data concerning the direct costs related to the said project:

What is the revenue to be recognized by the entity for the year ended December 31, 2021?

A. P340,000
B. P400,000
C. P440,000
D. P360,000

Use the following information for the next four questions:

On January 1, 2021, an entity accepted a long-term construction project for an initial contract price of
P1,000,000 to be completed on June 30, 2023. On January 1, 2022, the contract price was increased to
P1,500,000 by reason of change in the design of the project. The project was completed on December
31, 2023 which resulted to penalty amounting to P200,000.

The entity provided the following data concerning the direct costs related to the said project:

The outcome of the construction contract can be estimated reliably.

12. What is the construction revenue to be recognized by the entity for the year ended December 31,
2021?
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A. P340,000
B. P400,000
C. P440,000
D. P360,000

13. What is the realized gross profit (gross loss) to be recognized by the entity for the year ended
December 31, 2022?

A. P200,000
B. P80,000
C. P180,000
D. (P20,000)

14. What is the balance of construction in progress on December 31, 2022?

A. P1,200,000
B. P900,000
C. P1,120,000
D. P1,020,000

15. What is the realized gross profit (gross loss) to be recognized by the entity for the year ended
December 31, 2023?

A. P50,000
B. (P30,000)
C. P170,000
D. (P120,000)

16. In which of the following instances will the revenue from contracts with customers be recognized at a
point in time instead of over time?

A. When the customer simultaneously receives and consumes all of the benefits provided by the
entity as the entity performs.
B. When the entity's performance creates or enhances an asset that the customer controls as the
asset is created.
C. When the entity's performance does not create an asset with an alternative use to the entity
and the entity has an enforceable right to payment for performance completed to date.
D. When the entity has transferred physical possession and legal title to the asset to the customer.

17. When shall the incremental cost of obtaining a contract with a customer be recognized as an asset?

A. When it is probable that future economic benefits will flow to the entity and the cost can be
measured reliably.
B. When the entity expects to recover those costs.
C. When the costs will provide economic benefits for a period less than 12 months.
D. When the costs will decrease the revenue in the future periods.
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18. DELETERIOUS Construction Co. entered into a fixed price contract for the construction of a building
for HARMFUL, Inc. DELETERIOUS determines the stage of completion of construction contracts using the
“cost-to-cost” method.

The estimated total contract costs are as follows:

Design directly related to the contract 800,000
Technical assistance not directly related to the contract but properly allocated 200,000
Materials 22,000,000
Labor 11,200,000
Rectification and guarantee work 1,200,000
Reimbursable administrative costs specified in contractual agreement 520,000
Insurance costs 80,000
Other construction overheads 4,000,000
Marketing costs 400,000
40,400,00
Estimated total contract costs 0

DELETERIOUS incurred the following costs in the first year of the construction:
Design directly related to the contract 400,000
Technical assistance not directly related to the contract but properly allocated 100,000
12,000,00
Materials 0
Labor 6,000,000
Reimbursable administrative costs specified in contractual agreement 480,000
Administrative costs not expected to be reimbursed 120,000
Research and development costs for which reimbursement is not specified in the
contract 7,200,000
Insurance costs 60,000
Construction overheads 960,000
Marketing costs 800,000
28,120,00
Total costs incurred to date 0

What is the percentage of completion of the contract as of the end of the first year?
A. 42%
B. 45%
C. 50%
D. 51%

19. According to PFRS 15, a promised good or service is distinct if

I. The customer can benefit from the good or service either on its own or together with other
resources that are readily available to the customer.
II. The promise to transfer the good or service is separately identifiable from other promises in the
contract.
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III. The promise to transfer the good or service is explicitly stated in the contract, the rights of the
parties and payment terms are identifiable, and the collectability of the revenue from the
contract is probable.
A. I and II
B. I and III
C. I, II and III
D. None of these

20. Which of the following statements is correct?

A. Long-term construction contracts are unique from other contracts with customers. Therefore,
PFRS 15 excludes from its scope the accounting for long-term construction contracts.
B. Long-term construction contracts are unique from other contracts with customers. Therefore,
PFRS 15 requires an entity to recognize revenue from long-term construction contracts using
either the percentage of completion method or the zero-profit method.
C. PFRS 15 does not provide a special distinction between long-term construction contracts from
other types of contracts with customers. Therefore, an entity shall apply the same principles in
accounting for long-term construction contracts as those applied to other types of contracts with
customers.
D. PFRS 15 does not exclude long-term construction contracts from its scope. However, because of
the unique nature of long-term construction contracts, PFRS 15 requires an entity to recognize
revenue from a long-term construction contract that is expected to be completed within 3 years
or more using the percentage of completion method. For those that are expected to be
completed within a shorter period, revenue shall be recognized when construction is complete.

Use the following information for the next three questions:

Information on Sunny Day Construction Firm’s three-year construction contract with a customer is shown
below:
Contract price ₱9,000,000
Estimated costs at contract inception ₱8,000,000

Information on actual costs, billings and collections during construction period:

20x1 20x2 20x3
Actual costs incurred per year 1,944,000 5,232,000 1,844,000
Estimated costs to complete 6,156,000 2,024,000 -
Billings 1,800,000 4,950,000 2,250,000
Collections 1,620,000 4,455,000 2,925,000

Sunny Day uses the percentage of completion (based on costs) in recognizing revenues and profits from
the contract.

21. How much net profit (loss) is recognized in 20x2?

A. 216,000
B. 200,000
C. (200,000)
D. (416,000)

22. How much is the loss provision recognized in 20x2?

A. 32,000
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B. 44,000
C. 56,000
D. 68,000

23. How much net profit (loss) is recognized in 20x3?

A. 180,000
B. (180,000)
C. 20,000
D. (20,000)

24. What is the accounting treatment for the change in the contract price and construction costs to
complete in a long-term construction contract?

A. Retrospectively as change in accounting policy

B. Retrospectively as a change in accounting estimate
C. Retroactively as a prior period error
D. Prospectively as part of other comprehensive income

25. On January 1, 2021, an entity accepted a long-term construction project for an initial contract price
of P1,000,000 to be completed on June 30, 2023. On January 1, 2022, the contract price was increased
to P1,500,000 by reason of change in the design of the project. The project was completed on December
31, 2023 which resulted to penalty amounting to P200,000. The outcome of the construction contract
can be estimated reliably.

The entity provided the following data concerning the direct costs related to the said project:

What is the revenue to be recognized by the entity for the year ended December 31, 2021?

A. P340,000
B. P400,000
C. P440,000
D. P360,000

Use the following information for the next four questions:

On January 1, 2018, an entity started the construction of a building at a fixed contract price of
P1,000,000. On the same date, the customer paid a mobilization fee equal to 5% of contract price that
will be deductible from the first billing.

On 2018, the entity billed its customer equivalent to 30% of the contract price. On 2019, the entity billed
again its customer amounting to 20% of the contract price. On 2020, the entity billed again its customer
amounting to 40% of the contract price. The remaining billing was made at the year of completion of the
project.
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The entity made collection from the customer at the end of year 2018, 2019 and 2020, in the amount of
P120,000, P450,000 and P180,000, respectively. The outcome of construction contract cannot be
estimated reliably.

The entity provided the following data concerning the direct costs related to the said project:

26. What is the realized gross profit (loss) for the year ended December 31, 2019?

A. (P50,000)
B. (P200,000)
C. P150,000
D. None

27. What is the realized gross profit (loss) for the year ended December 31, 2020?

A. P80,000
B. P130,000
C. P50,000
D. None

28. What is the excess of construction in progress over progress billings (progress billings over
construction in progress) on December 31, 2020?

A. (P30,000)
B. (P80,000)
C. P20,000
D. P50,000

29. What is the balance of accounts receivable on December 31, 2020?

A. P150,000
B. P100,000
C. P50,000
D. P120,000

30. Under the “cost-to-cost” method, the percentage of completion may be computed as
A. Total costs incurred to date multiplied by the Estimated total costs to complete
B. Total costs incurred to date divided by the Estimated total costs to complete
C. Total costs incurred to date multiplied by the Estimated total costs to complete
D. Total costs incurred to date divided by the sum of Total costs incurred to date and Estimated
costs to complete

Use the following information for the next two questions:

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 ₱12M. The remodeling and the
installation are treated as a single performance obligation satisfied over time.
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The expected contract costs are as follows:

Generator 4,000,000
Other costs 5,000,000

Expected total contract costs 9,000,000

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 ₱6,000,000 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.
 Although ABC Co. acted as a principal in procuring the generator, ABC Co. is not involved in designing
or manufacturing the generator.

31. How much revenue is recognized in 20x1?

A. 7,200,000
B. 3,200,000
C. 4,000,000
D. 5,600,000

32. How much profit is recognized from the contract in 20x1?

A. 1,200,000
B. 1,800,000
C. 2,400,000
D. 5,600,000

33. Consigned goods are recognized as revenue

A. When the consignor sold the goods to third party

B. When the consignor’s inventory has been shipped to consignee
C. By the consignee when the inventory is sold to third party
D. By the consignor when it received payment from consignee for goods sold.

34. Flea Co. entered into a ₱10,000,000 contract to construct a multi-purpose recreational facility. The
estimated total costs on completion of the project were ₱8,000,000 and the contract period was 36
months starting January 1, 20x1. Flea Co. uses the cost-to-cost method to estimate its progress on the
project. On January 1, 20x2, the contract price was reduced to ₱9,500,000 due to many changes made to
the original contract. The accounting records relating to this contract for the years 20x1 to 20x3 disclosed
the following:

Year Actual costs in current year Estd. costs to complete Progress billings
20x1 3,000,000 5,000,000 2,800,000
20x2 3,500,000 1,600,000 4,000,000
20x3 1,700,000 - 2,700,000
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What amount of profit is recognized in 20x3? (Round-off percentages of completion to two decimal
places.)
A. 173,500
B. 176,500
C. 178,200
D. 180,400

35. What is the core principle of IFRS 15 Revenue from contracts with customers?

A. Revenue should be recognized when an entity transfers control of goods or services to a

customer.
B. Revenue should be recognized when an entity transfers control of goods or services to a
customer at an amount to which the entity expects to be entitled.
C. Revenue should be recognized over time in a manner that depicts an entity's performance.
D. Revenue should be recognized at a point in time when control of the goods or services is
transferred to the customer.

36. Entity A consigned his goods costing P50,000 to Entity B. Entity A paid freight of P3,000 to ship the
goods to Entity B. At the end of the period, only 40% of the consigned goods remained in the shop of
Entity B. Total cash sale received by Entity B from the customer was P50,000. Entity B incurred and paid a
total of P1,500 freight to deliver the goods to the customer. Also the terms of their contract were 10%
commission based on sales and any payment made by Entity B was to be reimbursed by Entity A. What is
the net income of Entity A at the end of the period?

A. 22,300
B. 27,300
C. 16,700
D. 11,700

37. When shall an entity recognize revenue from contracts with customers?

A. When it is probable that future economic benefits will flow to the entity and the revenue can be
measured reliably.
B. When or as the entity satisfies the performance obligation.
C. When the entity collected the cash from the customers.
D. When the entity and the customers sign the contracts.

38. On January 1, 20x1, ABC Co. enters into a contract with a customer for the construction of a building.
The contract price is ₱1,000,000. The following are the transactions in 20x1:
 At contract inception, the customer makes an advance payment of ₱100,000 as facilitation fee.
 ABC Co. incurs total contract costs of ₱300,000 during the period.
 The estimated costs to complete as of year-end amounts to ₱500,000.
 ABC Co. collects the billing, net of 10% customer-retention as specified in the contract.

ABC uses the input method based on costs incurred to measure its progress on the contract. How much
is the cost of construction that is recognized as expense in 20x1?
A. 175,000
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B. 375,000
C. 300,000
D. 285,000

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