In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs incurred plus 20% thereof. However, if the project is completed within 4 years, ABC will receive an additional payment of P200,000. Information on the project is shown below: 20x1 20x2 Costs incurred to date Estimated costs to complete 2,400,000 3,600,000 4,575,000 1,525,000 20x3 6,125,000 125,000 In 20x1 and 20x2, it was not highly probable that the project will be completed on time. However, in 20x3, ABC assessed that the project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received.

In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs incurred plus 20% thereof. However, if the project is completed within 4 years, ABC will receive an additional payment of P200,000. Information on the project is shown below: 20x1 20x2 Costs incurred to date Estimated costs to complete 2,400,000 3,600,000 4,575,000 1,525,000 20x3 6,125,000 125,000 In 20x1 and 20x2, it was not highly probable that the project will be completed on time. However, in 20x3, ABC assessed that the project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 88P

See similar textbooks

Similar questions

In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the total contract costs plus 25% thereof. However, if the project is completed within 4 years, ABC will receive an additional payment of 200,000. Information on the project is shown below: Costs incurred to date Estimated costs to complete 20x1 2,400,000 3,600,000 20x2 20x3 4,575,000 6,125,000 1,525,000 125,000 In 20x1 and 20x2, it was not highly profDIF25,000 that the project will be completed on time. However, in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received. suspension with invalidation of grade, 3rd violation- suspension How much profit is recognized on the contract in 20x3? CMP 131
Athena Co. started work on an P8M fixed-price construction contract in 20x1. Information on the contract is as follows: 20x1 20x2 20x3 Costs incurred per year 2,850,000 3,670,000 1,600,000 Estimated costs to complete 4,275,000 1,630,000 - Requirement: Compute for the amounts recognized in profit or loss in 20x1, 20x2, 20x3, respectively.
ABC Co. started work on an P8,000,000 fixed-price construction contract in 20x1. Information on the contract is as follows: 20x2 20x1 2,850,000 3,670,000 Costs incurred per year Estimated costs to complete 4,275,000 1,630,000 How much profit (loss) is recognized in 20x2?
Eminem Company recognized gross profit of P720,000 on its long-term project which has accumulated costs of P2,880,000. To finish the project, the company estimates that it has to incur additional costs of P1,920,000. Determine the contract price.
ABC Corp. uses the cost to cost method to account for its construction contracts. The contract price of the project is P2,000,000. ABC Corp. estimates that it will take 36 months to complete the contract. The following information for its construction contract is presented below: 20x1 20x2 20x3 Cost incurred to date 350,000 1,250,000 ? Realized gross profit for the current year 50,000 300,000 80,000 1. What is the percentage of completion rate in year 20x1? 2. What is the estimated cost to complete in year 20x1? 3. What is the percentage of completion rate in year 20x2? 4. What is the total estimated cost to complete in 20x3?
Philip Construction Company started a project with a contract price of P80 million. The cost incurred to date is P12 million and the estimated cost to complete is still P48 million. Under the cost cost basis, how much is the income from construction? a) P 20 Million b) P 8 Million c) P 32 Million d) P 4 Million
Use the following information for the next three questions: In 20x1, Friedland Co. entered into a contract with a customer for the construction of a building. The contract price is a fixed fee of P12,000,000. Information on the contract is shown below: 20x1 20x2 Costs incurred per year Estimated costs to complete 3,920,000 5,080,000 5,880,000 1,000,000
A&B Construction enters into a contract to construct a bridge for $1,400,000. At the outset, A&B estimates that it will cost $1,200,000 to build the bridge. Actual costs in 2017 are $540,000. Actual costs in 2018 are less than expected and amount to $600,000. The profits reported under the completed contract and percent of completion methods for each year would be: Select one: Completed Contract Percentage of Completion ○ a. 2017 2018 2017 2018 $0 $200,000 $90,000 $170,000 O b. Completed Contract Percentage of Completion 2017 2018 2017 2018 $0 $260,000 $90,000 $170,000 Completed Contract Percentage of Completion 2017 2018 2017 $0 $260,000 $123,000 2018 $197,000 ○ d. Completed Contract Percentage of Completion 2017 2018 2017 $0 $260,000 $90,000 2018 $110,000
The Heart Co. has just completed a 4-year contract to which the following relate: Labor and Materials costs 1,800,000 Machinery Cost Initial Design Costs Disposal proceeds of machinery 50,000 600,000 100,000 According to IFRS 15, What are the total contract cost?
P ABC Co. started work on an P8,000,000 fixed-price construction contract in 20x1. Information on the contract is as follows: 20x1 20x2 Costs incurred per year 2,850,000 3,670,000 Estimated costs to complete 4,275,000 1,630,000 How much profit (loss) is recognized in 20x2?
Egay Construction Corporation contracted with the province of Pampanga to construct a bridge at a contract price of P16,000,000. Egay Corporation expects to earn P1,520,000 on the contract. The percentage of completion method is to be used and the completion stage is to be determined by estimates made by the engineer. The following schedule 'summarizes the activities of the contract for years x0-x2. Estimate Cost to Cost Year Incurred х0 P4,600,000 4,500,000 5,250,000 xl x2 Engineer's Estimate of Complete P9,640,000 5,100,000 -0- x0 a. P545,600; b. P545,600; Billings Completion 31% 71 58% 100% 60 *A 10% retainer accounts for the difference collections. between billings and br Under the percentage of completion method, using the engineer's estimate as the measure of completion to be applied to revenues and costs, how much is the gross profit earned each year?id x1 x2 P 498,400; P 606,000 P1,044,000; c. P1,760,000; P6,400,000; d. P1,760,000; P1,800,000; Collection on Contract on Billings…
Tullis Construction enters into a long-term fixed price contract to build an office tower for $10,300,000. In the first year of the contract Tullis incurs $2,200,000 of cost and the engineers determined that the remaining costs to complete the project are $5,800,000. Tullis billed $3,600,000 in year 1 and collected $3,500,000 by the end of the year. How much gross profit should Tullis recognize in Year 1 assuming the use of the percentage-of-completion method? (Round any intermediary percentages to the nearest hundredth percent, and round your final answer to the nearest dollar) A. $2,832,500 B. $0 C. $5,032,500 D. $632,500 13