1.

Urider a construction contract, a contractor agrees to a fixed contract price of P2,000 to

refurbish the kitchen of a residential flat. The contractor’s initial estimate of contract costs on
February 1, 2016, the date of a contract is agreed, is P1,200.

The contractor has a December 31 year-end. The contract price will be paid to the contractor on
completion of the refurbishment.

The refurbishment was completed on July 31, 2016 at a cost of P1,250(i.e., actual cost incurred
under the contract as at July 31, 2016 are P1,250)

The contract revenue and contract cost for 2016 amounted to :

Revenue Cost Revenue Cost

a. P 0 P 0 c. P2,000 P1,200
b. P 750 P 0 d. P2,000 P1,250

2. Under a construction contract, a contractor agrees to a fixed contract price of P2,000 to

refurbish the kitchen of a residential flat. The contractor’s initial estimate of contract cost on
February 1, 2015, the date the contract is agreed, is P1,200. The contractor has a June 30 year-
end. The contract price will be paid to the contractor on completion of the refurbishment.

As at June 30, 2015 contract costs incurred for work performed to date are P800 and the
contract estimate that cost to complete the contract will be P400 (i. e., total contract costs will
be P1,200)

The refurbishment was completed on July 31, 2016 at cost of P1,250(i. e., actual costs incurred
under the contract as of July 31, 2016 are P1,250).

The contractor determines the stage of completion of the contract by calculating the proportion
that contract costs incurred for work performed to date bear to the latest estimated total
contract costs.

The contract revenue and contract cost for 2015 amounted to :

Revenue Cost Revenue Cost

a. P2,000 P 1,250 c. P 533 P 800
b. P1,333 P 800 d. P 0 P 0
3. Using the same information in No. 2, compute the contract revenue and contract costs for 2016
amounted to :
Revenue Cost Revenue Cost
a. P 667 P 450 c. P2,000 P 1,250
b. P 217 P 450 d. P 0 P 0
4. Under a construction contract, a contractor agrees to receive a 40 per cent fixed return on its direct
contract costs from the customer. The contractor`s initial estimate of contract costs on January 1, 2015,
the date the contract is agreed, is P2,000 (all of which are considered direct costs). Therefore, expected
revenue under the contract is P2,800. The contract is expected to last two years.

The contractor has a December 31 year-end.

On December 31, 2015 contract costs of P1,045 have been incurred and the contractor expects total
contract costs to be P1,900 (all considered direct costs).

On December 31, 2016 actual costs are P2,000. However, only P1,800 meet the criteria in the contract
to be considered direct costs when determining the 40 per cent fixed return.

The contractor determines the stage of completion of the contract by calculating the proportion that
contract costs incurred for work performed to date bear to the latest estimated total contract costs.

The contract revenue and contract costs for 2015 amounted to:

Revenue Costs Revenue Costs

a. P2,800 P2,000 c. P1,463 P1,045

b. P1,333 P 800 d. P1,337 P 955

5.Using the same information in No.4, the contract revenue and contract costs for 2016 amounted to:

Revenue Costs Revenue Costs

a. P2,520 P2,000 c. P1,057 P 755

b. P2,800 P 955 d. P1,057 P 955

6. A contractor enters into a construction contract on January 1, 2015. The contractor agrees to a fixed
price of P9,000 to build a bridge. The contractor's initial estimate of contract costs is P8,000. The
contract expects that it will take three years to build the bridge.

The contractor has a December 31 year-end.

By the end of the first year of the contract (December 31, 2015), the contractor's estimate of total costs
has increased to P8,050 (costs incurred in 2015 amounted to P2093).

In 2016 the customer and contractor agree to a variation resulting in an increase in contract revenue of
P200 and estimated additional contract costs of P150. At the end of 2016, costs incurred of P4,075
include P100 paid for standard materials stored at the site to be used in 2017 to complete the project.
The contractor determines the stage of completion of the contract by calculating the proportion that
contract costs incurred for work performed to date bear to the latest estimated total contract costs.

Determine the revenue, expenses, and profit for the year 2016:

a. Revenue: P4,468 Expenses: P3975 Profit: P493

b. Revenue: P2,340 Expenses: P2,093 Profit: P247

c. Revenue: P5,071 Expenses: P4,075 Profit: P503

d. Revenue: P4,568 Expenses: P4,075 Profit: P493

7. Using the same information in No.6, determine the revenue, expenses, and profit for the year 2017:

a. Revenue: P4,468 Expenses: P3,975 Profit: P493

b. Revenue: P2,340 Expenses: P2,093 Profit: P247

c. Revenue: P2,392 Expenses: P2,132 Profit: P260

d. Revenue: P2,592 Expenses: P2,032 Profit: P497

8. A construction contractor has a fixed price contract for P100,000 to construct a building (the project).

The contractor's estimate of total contract costs is P60,000. It will take two years to construct the
building.

At the end of the first year of the project (31, December 2016):

• the contractor has incurred costs of P20,000 on the contract, including P2,000 on cement that is held
offsite

• on independent surveyor certified that 28 percent of the contract work is completed

• the site was cleared (stipulated in the contract to constitute 10 percent of the total project), the
foundation laid (stipulated as 5 percent of the total project) and the walls of the building erected
(stipulated as 14 percent of the total project)

The contractor determines that the stage of completion of the construction contract is measured most
reliably by reference to the proportion that costs incurred for work performed to date bear to the
estimated total costs.

On December 31, 2016 the stage of completion of the contract is:

a. 33 1/3%
b. 30%

c. 29%

d. 28%

9. Assuming the same information with no. 8 and if the contractor determines that the stage of
completion of the construction construct is measured most reliably by reference to independent surveys
of worked performed . The 31 December 2016 stage of completion of the contract is.

a. 33.1/3% c. 29%

b. 30% d. 28%

10. Assuming the same information with No.8 and if the contractor determines that the stage of
completion of the construction contract is measured reliably by reference to completion of physical
proportion of the conract work.

a. 33.1/3% c. 29%

b. 30% d. 28%

11. A construction contractor has a fixed price contract for P100,000 to construct a building (the project)

The contractor’s initial estimate of total contract costs is P60,000. It will take two years to construct the
building.

At the end of the first year of the project (31 December 2016) the contractor has incurred costs of
P20,000 on the contract, including P2,000 on cement that is held offsite. The entity’s estimate of total
contract costs has stayed the same.

The contractor determines the stage of completion of the construction contract by reference to the
proportion that costs incurred for work performed to date bear to the estimated total costs.

Determine the revenue, expenses and profit for the year 2016:

a. Revenue: P30,000 Expenses: P18,000 Profit: P12,000

b. Revenue: P32,000 Expenses: P20,000 Profit: P12,000
c. Revenue: P31,333 Expenses: P18,000 Profit: P13,333
d. Revenue: P33,333 Expenses: P20,000 Profit: P13,333
12. Using the same information in No.11, compute “the gross amount due from customers for contract
work” for this contract:

a. P32,000 c. P20,000

b. P30,000 d. P18,000

13. Using the same information in No.11, and if the contractor determines the stage of completion of
the construction contract by reference to independent surveys of worked performed. At the end of 2016
the project was certified to be 28 percent complete.

Determine the revenue, expenses, and profits for the year 2016 by using the actual cost approach:

a. Revenue: P28,000 Expenses: P18,000 Profit: P10,000

b. Revenue: P28,000 Expenses: P20,000 Profit: P8,000
c. Revenue: P29,000 Expenses: P18,000 Profit: P11,200
d. Revenue: P31,200 Expenses: P20,000 Profit: P11,200

14. Using the same information in Nos. 11 and 13, compute “the gross amount due from customers for
contract work” wok for this contract:

a. P32,000 c. P28,000

b. P30,000 d. P18,000

15. Using the same information in No.11, and if the contractor determines the stage of completion of
the construction contract by reference to independent surveys of work performed. At the end of 2016
the project was certified to be 32 percent complete. Progress billings of P30,000 have been made at the
end of 2016 and the customer has paid P20,000 of these progress billings:

Dteremine the revenue, expenses, and profit for the year 2016 by using the actual cost approach:

a. Revenue: P32,000 Expenses: P18,000 Profit: P14,000

b. Revenue: P30,000 Expenses: P20,000 Profit: P10,000
c. Revenue: P30,800 Expenses: P18,000 Profit: P12,800
d. Revenue: P32,800 Expenses: P20,000 Profit: P12,600

16. Using the same information in Nos. 11 and 15 compute "the gross amount due from customers for
contract work" for this contract :
a. 32000

b. 30000

c. 28000

d. 2000

17. A construction contractor has a fixed price contract for P100,000 to construct a building (the project)

The contactor’s initial estimate of total contract costs was P60,000.

At the end of the first year of the project (2016) the contractor has incurred P90,000 contract costs and
it expects to incur a further P30,000 to complete the project.

The contractor determines the stage of completion of the construction contract by reference to the
proportion that costs incurred for work performed to date bear to the estimated total costs.

Determine the revenue, expenses, and profits for the year 2016 by using the actual cost approach:

a. Revenue: P75,000 Expenses: P95,000 Loss: P(20,000)

b. Revenue: P75,000 Expenses: P90,000 Loss: P(15,000)
c. Revenue: P70,000 Expenses: P90,000 Loss: P(20,000)
d. Revenue: P110,000 Expenses: P95,000 Loss: P(15,000)

18. Using the same information in No.17, compute “the gross amount due from customers for contract
work” for this contract:

a. P110,000 c. P90,000

b. P105,000 d. P70,000

19. In 2015, a contractor completed the construction of a building for a customer. The contractor
recognized the P100,000 fixed price contract in revenue in the two year construction period using the
percentage of completion method.

In 2016, when the customer owed the contractor P100,000 for constructing the building, a tsunami
destroyed the customer’s business. A t the end of 2016 the liquidator of the customer had informed the
customer’s creditors that they would receive a liquidation dividend of 10 percent of the amount owed to
them by the customer in full and final settlement of the debt.

In 2016 when the collectibility of the amount was no longer probable, the contractor must recognize an
expense of:
 a. Nill or zero c. P90,000
b. P10,000 d. P100,000

20. On January 1,2015 a contractor’s estimate of total contract costs is still P8,000. However, by the end
of 2016 the contractor’s estimate of contract costs increased to P10,000, excluding the variation below.

In 2016, the customer and the contractor agree to a variation resulting in an increase in contract
revenue of P200 and estimated additional contract costs of P150.

Actual cumulative costs incurred to the end of 2015, 2016 and 2017 (the end of the contract) including
the costs of the variation are P3,000, P7,105 and P10,050 respectively.

At the end of 2015,2016 and 2017 the customer paid the contractor progress billings of P5,000, P3,000
and P4,200 respectively. The contractor determines the stage of completion of the contract by
calculating the proportion that contract costs incurred for work performed to date bear to the latest
estimated total contract costs.

Determine the profit (loss) for each year:

a. 2015: P1,500 2016: P(65) 2017: P715

b. 2015: P1,500 2016: P1,435 2017: P2,150
c. 2015: P1,575 2016: P(140) 2017: P715
d. 2015: P1,500 2016: P(205) 2017: P855

21. Using the same information in No.20 compute “the gross amount due from (to) customers for
contract work”:

a. 2015: P( 500) 2016: P540 2017: P0

b. 2015: P500 2016: P (540) 2017: P0

c. 2015: P5,000 2016: P540 2017: P715

d. 2015: P4,500 2016: P (205) 2017: P855

22. A construction contractor builds a home under a contract with a fixed price of P1,000,000. The
contractor incurred contract costs of P200,000, P400,000 and P100,000 in 2015,2016 and 2017
respectively. At the end of 2015 the contractor estimated (with sufficient reliability) the future costs to
complete the contract as P400,000. At the end of 2016 the contractor estimated (with sufficient
reliability) the future costs to complete the contract as P150,000. The contract was completed in 2017.

The contractor determines the stage of completion of the construction contract by reference to the
proportion that costs incurred for work performed to date bear to the estimated total costs.
The contractor must recognize contract revenue at:

a. P333,333 in 2015, P466,6667 in 2016 and P200,000 in 2017

b. P1,000,000 in 2015, P0 in both 2016 and 2017
c. P0 in both 2015 and 2016 and P1,000,000 in 2017
d. P333,333 in 2015, P333,333 in 2016 and P333,333 in 2017

23. Using the same information in No.22. however, contract costs incurred at the end of 2016 included
P50,000 prepaid wages.

The contractor must recognize contract revenue at:

a. P333,333 in 2015, P466,667 in 2016 and P200,000 in 2017

b. P333,333 in 2015, P400,000 in 2016 and P266,667 in 2017
c. P0 in both 2015 and 2016 and P1,000,000 in 2017
d. P333,333 in 2015, P333,333 in 2016 and P333,333 in 2017

24. A construction contract has a fixed contract for P100,000 to construct a building of a design that
has never before been constructed and using materials that have never been used in the
construction of building materials that have never before been used in the construction of building.

The contractor began construction of the building in 2016 and expects that construction will take at
least five years. In 2016 the contractor incurred P5,000 contract costs on the project.

At the end of 2016 the contractor cannot estimate the outcome of the contract with sufficient
reliability to estimate the project’s percentage of completion. (because of the uncertainties arising
from the new design and new materials the entity cannot estimate total expected contract costs
with sufficient reliability). It is highly likely that the contract price will be received from the
customer.

At the end of 2016 the contractor must recognize revenue of:

a. Nill or zero
b. P5,000
c. P100,000
d. Incomplete data

25. A construction contractor builds a home under a contract with a fixed price of P1,000,000. The
contractor incurred contract costs of P10,000, P890,000 and P200,000 in 2015, 2016 and 2017
respectively. At the end of 2016 the outcome of the transaction cannot be estimated reliably however it
is probable that the costs incurred in 2016 will be recoverable. At the end of 2017 the contractor can
estimate the outcome of the contract reliably and estimates costs to complete the contract at P200,000.
The contract was completed in 2018.

The contractor determines the stage of completion of the construction contract by reference to the
proportion that costs incurred for work performed to date bear to the estimated total costs.

In 2017 the contractor must:

a. Recognize contract revenue of P818,182 and contract costs of P900,000

b. Recognize contract revenue of P808,182 and contract costs of P890,000
c. Recognize contract revenue of P808,182 and contract costs of P908,182
d. Recognize contract revenue of P808,182 and contract costs of P900,000