VSA CPA Review

Advanced Financial Accounting and Reporting Construction Contracts

1. Contract price amounted to P1,000,000 and total estimated cost amounted to P700,000. How much is the
percentage of completion if P175,000 of the P700,000 has already been incurred?
a. 100% c. 75%
b. 25% d. 50%

2. Contract price amounted to P1,200,000 and total estimated cost initially amounted to P750,000. How much is the
percentage of completion if P100,000 is the cost incurred and P700,000 is the estimated remaining cost at the end
of the year?
a. 100 / 700 c. 100 / 750
b. 100 / 800 d. 100 / 100

3. The entity used the revenue recognition over time under PFRS 15. Contract price amounted to P1,000,000 and
total estimated cost initially amounted to P750,000. How much is the revenue for year one if P100,000 is the cost
incurred and P700,000 is the estimated remaining cost at the end of the year?
a. P125,000 c. P25,000
b. P100,000 d. P0

4. The entity used the revenue recognition over time under PFRS 15. Contract price amounted to P1,000,000 and
total estimated cost initially amounted to P750,000. How much is the gross profit realized for year one if P100,000
is the cost incurred and P700,000 is the estimated remaining cost at the end of the year?
a. P125,000 c. P25,000
b. P100,000 d. P0

5. The entity used the revenue recognition over time under PFRS 15. Contract price amounted to P1,000,000 and
total estimated cost initially amounted to P750,000. How much is the net income for year one if P100,000 is the
direct cost incurred, P10,000 is the indirect cost incurred and P700,000 is the estimated remaining cost at the end
of the year?
a. P125,000 c. P25,000
b. P15,000 d. P22,500

6. Contract price amounted to P1,000,000 and total estimated cost amounted to P700,000. Cost incurred to date
amounted to P175,000. How much is the revenue to be recognized to date under percentage of completion
method?
a. P125,000 c. P250,000
b. P100,000 d. P0

7. Contract price amounted to P1,000,000 and total estimated cost amounted to P700,000. Cost incurred to date
amounted to P175,000. How much is the revenue to be recognized to date under zero profit method?
a. P125,000 c. P300,000
b. P175,000 d. P0

8. Contract price amounted to P1,000,000 and total estimated cost amounted to P700,000. Cost incurred to date
amounted to P175,000. How much is the gross profit realized to date under zero profit method?
a. P125,000 c. P300,000
b. P175,000 d. P0

9. Contract price amounted to P1,000,000 and total estimated cost amounted to P700,000. Cost incurred to date
amounted to P175,000 as of year 1 and P700,000 as of year 2. The project was completed in year 2. How much
is the gross profit realized to date under zero profit method in year 1?
a. P300,000 c. P475,000
b. P175,000 d. P0

10. Using the same information as in the previous problem, how much is the revenue recognized in year 2?
a. P700,000 c. P525,000
b. P875,000 d. P825,000

11. Contract price amounted to P1,000,000 and total estimated cost amounted to P1,200,000. How much loss is to be
recognized if the percentage of completion is only 70%?
a. P200,000 c. P60,000
b. P140,000 d. P0

12. The construction in progress amounted to P100,000 and progress billings amounted to P80,000. How much is CIP
net of billings or contract assets?
a. P100,000 c. P20,000
b. P80,000 d. P0

13. The construction in progress amounted to P100,000 and progress billings amounted to P130,000. How much is
the billings net of CIP or contract liabilities?
a. P100,000 c. P30,000
b. P130,000 d. P0
14. If the cost incurred to date amounted to P100,000 and cumulative recognized profit amounted to P30,000, how
much is the CIP or construction in progress?
a. P100,000 c. P70,000
b. P130,000 d. P0

15. If the cost incurred to date amounted to P100,000 and recognized loss to date amounted to P40,000, how much is
the CIP or construction in progress?
a. P60,000 c. P100,000
b. P140,000 d. P40,000

16. If the present value of the P500,000 receivable from the government for a construction contract amounted to
P450,000, how much construction revenue must be recognized if the percentage of completion is 50%?
a. P450,000 c. P225,000
b. 500,000 d. P250,000

17. Ramos Builders, Inc. entered into a P10,000,000 contract to construct a multi-purpose recreational facility. The
estimated cost to complete the project was P8,000,000 and the contract period was 36 months starting January 1,
2023. The company uses the cost-to-cost method of estimating earnings. On January 1, 2024, the contract price
was reduced to P9,500,000 due to many changes made to the original contract. The accounting records relating to
this contract for the years 2023 to 2024 disclosed the following:
Actual cost Estd. Cost to Progress
(Current year) Complete Billings
2023 P 3,000,000 P 5,000,000 P 2,800,000
2024 3,500,000 1,600,000 4,000,000
2025 1,700,000 2,700,000

What was the estimated gross profit (loss) recognized for the year ended December 31, 2025?
a. P262,560 c. P176,550
b. P(119,850) d. P266,250

USE THE FOLLOWING DATA FOR NUMBERS 18 TO 19. Marsh Construction Co. began operations in 2024.
Construction activity for 2024 is shown below.
Contract Contract Billings Collections Costs to Estimated
Price Through Through 12/31/24 Costs to
12/31/24 12/31/24 Complete
1 P 720,000 P 300,000 P 200,000 P 164,000 P 376,000
2 P 660,000 P 380,000 P 360,000 P 450,000 P 240,000

18. If Marsh uses the revenue recognition over time, which of the following should be shown on the balance sheet at
December 31, 2024 related to Contract 1?
a. Contract asset, P218,880 c. Contract liability, P81,120
b. Contract asset, P81,120 d. Contract liability, P300,000

19. If Marsh uses the percentage of completion method, which of the following should be shown on the balance sheet
at December 31, 2024 related to Contract 2?
a. Contract asset, P40,000 c. Contract liability, P30,000
b. Contract asset, P70,000 d. Contract liability, P70,000

20. On January 1, 2023, DMCI Inc. accepted a long-term construction contract to build a condominium with a total
contract price of P60,000,000. For the two years ended December 31, 2023 and 2024, the following data were
provided by DMCI Inc.:
12/31/2023 12/31/2024
General administration cost which is not reimbursable
P4,000,000 P6,000,000
under the contract for the year
Site labor costs including site supervision for the year 7,000,000 10,000,000
Selling cots for the year 8,000,000 2,000,000
Cost of direct materials used in construction for the year 5,000,000 6,800,000
Estimated cost to complete the condominium at year end 8,000,000 7,200,000
DMCI Inc. billed its client 30% during 2023 and 40% during 2024.
Under IFRS 15, what is the balance of the contract assets to be presented in the DMCI’s December 31, 2024
Statement of Financial Position?
a. 48,000,000 c. 6,000,000
b. 42,000,000 d. 7,200,000