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CCIFP – Introduction Questions and Answers Latest
Version (2024/2025) Graded A+
The Project Management Team of ABC Company has informed the CFO that a
project is running into trouble with respects to the budgeted costs for the work.
They have informed the CFO that they expect the project to sustain a loss of 15%.
The job is expected to be completed in 2 years. The company uses the percentage
of completion method to recognize income. When should the company recognize
the potential loss? - (ANSWER)In full in the year the loss was determined
Which of the following is a contract-related asset? - (ANSWER)Costs and
Estimated Earnings in Excess of Billings
Which of the following is a contract-related liability? - (ANSWER)Accrued
Contract Costs
What type of contract is used when one entity works under a single contract to
provide both the design of the work and the performance of the construction
services? - (ANSWER)Design-build contract
What type of contracting method is also known as lump sum contract, and
provides for the contractor's performance of all work to be performed under the
contract for a stated price? - (ANSWER)Fixed price contract method
, 2
What contracting method provides for reimbursement of allowable or otherwise
defined costs incurred plus a fee for the contractor's services? - (ANSWER)Cost-
plus-fee contract method
What contract method generally provides for payments to the contractor on the
basis of direct labor hours at fixed hourly rates and cost of materials or other
specified costs? - (ANSWER)Time and material contract method
What contract method is used when a contractor is paid a specified price per each
unit of output? - (ANSWER)Unit price contract method
The portion of total billing that is NOT required to be paid by the owner until
certain conditions are met is known as... - (ANSWER)Retention
ABC Company hires a subcontractor to work on a project that will span over 5
years. The subcontract amount is $500,000 and is to be billed monthly to ABC
Company. Retention of 10% is to be held until the subcontractor is 75% complete
and the owner of the project has approved the release of retention. How should
ABC Company record the subcontractor retention on its records in the first year of
the project? - (ANSWER)Current liability
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ABC Company is preparing their monthly billing for the XYZ Owner Development
project and the following are the details of the monthly application for payment:
Total Gross Base Contract Billing $1,000,000 inclusive of $200,000 in stored
material billing, and gross change order billing of $100,000. The retention amount
is 10%. What is the correct journal entry to record the current month's application
for payment? - (ANSWER)DR: Contract Receivable - $990,000
DR: Retention Receivable - $110,000
CR: Contract Revenue - $1,100,000
Step-by-Step Solution
1. Calculate the Total Billing Amount:
Gross Base Contract Billing: $1,000,000
Gross Change Order Billing: $100,000
Total Gross Billing = $1,000,000 + $100,000 = $1,100,000
2. Calculate the Retention Amount:
Retention Amount = 10% of Total Gross Billing
Retention = $1,100,000 × 10% = $110,000
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3. Calculate the Contract Receivable:
Contract Receivable = Total Gross Billing - Retention
Contract Receivable = $1,100,000 - $110,000 = $990,000
ABC Company enters into a purchase order to purchase new construction
equipment from XYZ Company. The equipment has a useful life of 5 years. The
details of the purchase order are as follows:
- Equipment Cost: $500,000
- Freight Costs: $5,000
- Sales Tax: $35,000
The company also signed a maintenance agreement for 5 years, which will be
billed separately at the rate of $10,000 plus sales tax of $700 per year.
Question: At what value should the equipment be recorded on the books of ABC
Company? - (ANSWER)$540,000
Costs and estimated earnings in Excess of Billings on uncompleted contracts are
recorded on the contractor's financial statements as... - (ANSWER)A current asset
CCIFP – Introduction Questions and Answers Latest
Version (2024/2025) Graded A+
The Project Management Team of ABC Company has informed the CFO that a
project is running into trouble with respects to the budgeted costs for the work.
They have informed the CFO that they expect the project to sustain a loss of 15%.
The job is expected to be completed in 2 years. The company uses the percentage
of completion method to recognize income. When should the company recognize
the potential loss? - (ANSWER)In full in the year the loss was determined
Which of the following is a contract-related asset? - (ANSWER)Costs and
Estimated Earnings in Excess of Billings
Which of the following is a contract-related liability? - (ANSWER)Accrued
Contract Costs
What type of contract is used when one entity works under a single contract to
provide both the design of the work and the performance of the construction
services? - (ANSWER)Design-build contract
What type of contracting method is also known as lump sum contract, and
provides for the contractor's performance of all work to be performed under the
contract for a stated price? - (ANSWER)Fixed price contract method
, 2
What contracting method provides for reimbursement of allowable or otherwise
defined costs incurred plus a fee for the contractor's services? - (ANSWER)Cost-
plus-fee contract method
What contract method generally provides for payments to the contractor on the
basis of direct labor hours at fixed hourly rates and cost of materials or other
specified costs? - (ANSWER)Time and material contract method
What contract method is used when a contractor is paid a specified price per each
unit of output? - (ANSWER)Unit price contract method
The portion of total billing that is NOT required to be paid by the owner until
certain conditions are met is known as... - (ANSWER)Retention
ABC Company hires a subcontractor to work on a project that will span over 5
years. The subcontract amount is $500,000 and is to be billed monthly to ABC
Company. Retention of 10% is to be held until the subcontractor is 75% complete
and the owner of the project has approved the release of retention. How should
ABC Company record the subcontractor retention on its records in the first year of
the project? - (ANSWER)Current liability
, 3
ABC Company is preparing their monthly billing for the XYZ Owner Development
project and the following are the details of the monthly application for payment:
Total Gross Base Contract Billing $1,000,000 inclusive of $200,000 in stored
material billing, and gross change order billing of $100,000. The retention amount
is 10%. What is the correct journal entry to record the current month's application
for payment? - (ANSWER)DR: Contract Receivable - $990,000
DR: Retention Receivable - $110,000
CR: Contract Revenue - $1,100,000
Step-by-Step Solution
1. Calculate the Total Billing Amount:
Gross Base Contract Billing: $1,000,000
Gross Change Order Billing: $100,000
Total Gross Billing = $1,000,000 + $100,000 = $1,100,000
2. Calculate the Retention Amount:
Retention Amount = 10% of Total Gross Billing
Retention = $1,100,000 × 10% = $110,000
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3. Calculate the Contract Receivable:
Contract Receivable = Total Gross Billing - Retention
Contract Receivable = $1,100,000 - $110,000 = $990,000
ABC Company enters into a purchase order to purchase new construction
equipment from XYZ Company. The equipment has a useful life of 5 years. The
details of the purchase order are as follows:
- Equipment Cost: $500,000
- Freight Costs: $5,000
- Sales Tax: $35,000
The company also signed a maintenance agreement for 5 years, which will be
billed separately at the rate of $10,000 plus sales tax of $700 per year.
Question: At what value should the equipment be recorded on the books of ABC
Company? - (ANSWER)$540,000
Costs and estimated earnings in Excess of Billings on uncompleted contracts are
recorded on the contractor's financial statements as... - (ANSWER)A current asset
