REVENUE RECOGNITION – LONG TERM CONSTRUCTION AND FRANCHISE ACCOUNTING
EXERCISE 1
SMDC CORPORATION signed contract to build a building over a period of 3 years
for a price of P7,000,000. Information relating to the performance of the
contract is summarized as follows:
2017 2018 2019
Construction cost incurred during the P1,500,000 2,420,000 1,680,000
year
Estimated cost to complete 3,500,000 1,680,000
Billings during the year 1,200,000 2,600,000 3,200,000
Collections during the year 1,000,000 2,700,000 3,300,000
Prepare the entries under percentage of completion.
EXERCISE 2
STA. CLARA Construction Company has used the cost to cost percentage of
completion method of recognizing revenue. In reviewing the records, Sta. Clara
finds the following information regarding a recent completed building project
for which the total contract was P20,000,000.
Gross profit (loss) Cost Incurred
2017 P 400,000 P 3,600,000
2018 1,400,000 ?
2019 (200,000) 8,200,000
1. How much is the contract revenue during 2017?
2. What is the percentage of completion in 2017?
3. How much is the cost incurred in 2018?
4. What is the percentage of completion in 2018?
5. How much is the total estimated cost to complete in 2018?
6. How much is the total estimated gross profit in 2018?
EXERCISE 3
ACE has two construction jobs, which commenced during 2018:
Project 1 Project 2
Contract Price P21,000,000 P7,500,000
Cost Incurred during 2018 6,000,000 7,000,000
Estimated cost to complete 3,000,000 1,750,000
Contract billings during 2018 6,250,000 7,250,000
Collections 6,000,000 7,000,000
Expenses 500,000 250,000
Compute the net income (loss) that Ace would report in its 2018 Statement of
Comprehensive Income under Zero-Profit and Percentage of Completion Method.
EXERCISE 4
In 2020, MYIESHA Construction began work on a 3-year contract. The contract
price was P6,000,000. MYIESHA uses the percentage of completion method over
time for financial accounting purposes. The financial statement presentation
relating to this contract at December 31, 2020 was as follows:
BALANCE SHEET
Accounts Receivable – construction contracts P 129,000
Construction in progress P 390,000
Less: Contract Billings 369,000
Cost uncompleted contract in excess billings 21,000
INCOME STATEMENT
Gross profit (before tax) recognize in 2020 P 109,200
1. How much was collected in 2020?
2. What is the percentage of completion for the year ended?
3. What was the initial gross profit on the contract?
EXERCISE 5
This study source was downloaded by 100000899606070 from CourseHero.com on 02-23-2026 01:00:49 GMT -06:00
ADVANCED FINANCIAL ACCOUNTING 1
https://www.coursehero.com/file/53506178/AFAR-105-LONG-TERM-CONSTRUCTION-AND-FRANCHISE-ACCOUNTINGpdf/
EXERCISE 1
SMDC CORPORATION signed contract to build a building over a period of 3 years
for a price of P7,000,000. Information relating to the performance of the
contract is summarized as follows:
2017 2018 2019
Construction cost incurred during the P1,500,000 2,420,000 1,680,000
year
Estimated cost to complete 3,500,000 1,680,000
Billings during the year 1,200,000 2,600,000 3,200,000
Collections during the year 1,000,000 2,700,000 3,300,000
Prepare the entries under percentage of completion.
EXERCISE 2
STA. CLARA Construction Company has used the cost to cost percentage of
completion method of recognizing revenue. In reviewing the records, Sta. Clara
finds the following information regarding a recent completed building project
for which the total contract was P20,000,000.
Gross profit (loss) Cost Incurred
2017 P 400,000 P 3,600,000
2018 1,400,000 ?
2019 (200,000) 8,200,000
1. How much is the contract revenue during 2017?
2. What is the percentage of completion in 2017?
3. How much is the cost incurred in 2018?
4. What is the percentage of completion in 2018?
5. How much is the total estimated cost to complete in 2018?
6. How much is the total estimated gross profit in 2018?
EXERCISE 3
ACE has two construction jobs, which commenced during 2018:
Project 1 Project 2
Contract Price P21,000,000 P7,500,000
Cost Incurred during 2018 6,000,000 7,000,000
Estimated cost to complete 3,000,000 1,750,000
Contract billings during 2018 6,250,000 7,250,000
Collections 6,000,000 7,000,000
Expenses 500,000 250,000
Compute the net income (loss) that Ace would report in its 2018 Statement of
Comprehensive Income under Zero-Profit and Percentage of Completion Method.
EXERCISE 4
In 2020, MYIESHA Construction began work on a 3-year contract. The contract
price was P6,000,000. MYIESHA uses the percentage of completion method over
time for financial accounting purposes. The financial statement presentation
relating to this contract at December 31, 2020 was as follows:
BALANCE SHEET
Accounts Receivable – construction contracts P 129,000
Construction in progress P 390,000
Less: Contract Billings 369,000
Cost uncompleted contract in excess billings 21,000
INCOME STATEMENT
Gross profit (before tax) recognize in 2020 P 109,200
1. How much was collected in 2020?
2. What is the percentage of completion for the year ended?
3. What was the initial gross profit on the contract?
EXERCISE 5
This study source was downloaded by 100000899606070 from CourseHero.com on 02-23-2026 01:00:49 GMT -06:00
ADVANCED FINANCIAL ACCOUNTING 1
https://www.coursehero.com/file/53506178/AFAR-105-LONG-TERM-CONSTRUCTION-AND-FRANCHISE-ACCOUNTINGpdf/
