INTEGRATED REVIEW 2: Advanced
Financial Accounting and Reporting (AFAR)
#3 | Installment Sales & Long-term Construction Contracts
Part I: Installment Sales (1-140) 1. Under Under the the cost cost recover recovery y meth method, od, A. The initial collections on the sale are treated as recovery of the cost of the inven nvento torry sold. old. Th Thus us,, no gros grosss prof profit it or inte intere resst inco income me is reco recogn gniz ized ed unti untill total otal collections from the sale equals the cost of inventory sold. B. The initial collections on the sale are treated as recovery of the cost of the inve invent ntor ory y sold sold.. Th Thus us,, no gros grosss prof profit it is reco recogn gniz ized ed unti untill tota totall coll collec ecti tion onss from from the the sale sale equa equals ls the the cost cost of inve invent ntor ory y sold sold.. Howe Howeve ver, r, inte intere rest st inco income me may may none noneth thel eles esss be recognized. C. A or B. D. None None of thes these. e. (Millan, 2016) 2. Under the install installment ment sales sales method, method, an “over allowance allowance is” is” A. Treated as addition to the installment sale price when computing for the gross profit rate. B. Treate ated as reduc duction to the inst nstallment sale ale price when hen com computing for the gross profit rate. C. Not Not acc accoun ounte ted d for for D. None None of of the these se (Millan, 2016) 3. The excess of trade-in value over the fair value of a traded-in merchandise in a sale accounted for under the installment sales method represents A. Over Over allo allowa wance nce B. Unde Underr allo allowa wance nce C. No allo allowa wanc ncee D. Smal Smalll allo allowa wanc ncee (Millan, 2016) 4. Merchandise Merchandise received received as trade-in trade-in is recognized recognized at A. Fair Fair valu valuee B. Orig Origin inal al cos costt C. Curr Curren entt cos costt D. Any Any of of the these se (Millan, 2016)
5. For purposes purposes of of applying applying the installment installment sales method, “fair value” is is A. The appraised appraised value of the repossesse repossessed d property or traded-in traded-in merchandi merchandise se B. Th Thee esti estima mate ted d sell sellin ing g pric pricee of the the repo reposs sses esssed prop proper erty ty or trade radedd-in in merch erchan andi disse less less reco recond ndit itio ioni ning ng cost costss and and norm normal al prof profit it marg margin in,, at date date of repo reposs sses essi sion on or date date of trade-in. C. A or B D. None None of of the these se (Millan, 2016) 6. Oliver ver Co. uses the installment ent sales ales meth ethod. od. When an acc account unt had a balan alancce of P8,4 8,400, no furt urther collect ections could uld be made and the dining room set was repo epossessed. At that tim time, it was was est estimat imated ed that hat the the dini dining ng room room set coul could d be sold sold for P2,4 P2,400 00 as repo reposs sses esssed or for for P3,0 P3,000 00 if the com company pany spend pend P300 P300 reco recond ndit itio ioni ning ng it. it. Th Thee gros grosss prof profit it rate ate on this his sale ale was 70%. The gain or loss on repossession was a A. P5,8 P5,880 80 loss loss B. P6,0 P6,000 00 loss loss C. P 600 600 gai gain n D. P 180 180 gain gain (Dayag, 2015) 7. The Molino Furniture Company appropriately used the installment sales method in acco accoun untting ing for the follo ollowi wing ng ins install tallme ment nt sal sale. Dur During ing 2016 2016,, Molin olino o sold old furni urnitture ure to an individual for P3,000 at a gross profit of P1,200. On June 1, 2016, this installment account receivable had a balance of P2,200 and it was determined that no further collections would be made. Molino, therefore repossessed the merchandise. When reacquired, the merchandise was appraised as being worth only P1,000. In order to impr improv ovee its its sala salabi bili lity ty,, Beng Bengal al incu incurr rred ed cost costss of P100 P100 for for reco recond ndit itio ioni ning ng.. Norm Normal al prof profit it on resale is P200. What should be the loss on repossession attributable to this merchandise? A . P 220 B. P 620 C. P 320 D . P 880 (Dayag, 2015)
8. The The Cindy indy,, Inc. nc. bega began n oper operat atin ing g at the the begi beginn nnin ing g of the the cal calenda endarr year year 2016 2016 and, and, usin using g the installment method of accounting, presented the following data for the first year: Installment sales Gross margin based on cost
P 400,000 66- ⅔%
Inventory, Dec. 31, 2016
80,000
General and administrative expenses
40,000
Accounts receivable, Dec. 31, 2016
320,000
The balance of the deferred gross profit account, end of 2016 should be: A. P192 P192,0 ,000 00 B. P128 P128,0 ,000 00 C. P96,000 000 D. P80, P80,00 000 0 (Dayag, 2015)
9. Fryman Furniture uses the installment-sales method. No further collections could be made on an account with a balance of P18,000. It was estimated that the repossessed fur furnitu niture re coul could d be sold old as is for P5,4 P5,400 00,, or for P6,3 P6,300 00 if P300 P300 were were spent pent recon econdi diti tion oniing it. The gross profit rate on the original sale was 40%. The loss on repossession was: A. P4,500 B. P4,800 C. P12,000 000 D. P12, P12,60 600 0 (Dayag, 2015) 10. 10. EMC EMC Motor otorss, a deal dealer er of motor otor vehi vehicl cle, e, sales ales excl exclus usiv ivel ely y on ins install tallme ment nt basi basis. s. One One of its its customers, Mr. Ambo purchased a motorcycle for P45,375. The cost to EMC was P25, P25,41 410. 0. Afte Afterr maki making ng an init initia iall paym paymen entt of P6,0 P6,050 50,, Mr. Mr. Am Ambo bo defa defaul ulte ted d on subs subseq eque uent nt payments. EMC lost no time in repossessing the motor vehicle which, by this time, was appr apprai aise sed d at a valu valuee of P12, P12,65 650. 0. EM EMC C had had to incu incurr addi additi tion onal al cost cost of repa repair irs/ s/re remo mode dell llin ing g of P1,6 P1,650 50 bef before ore the motor otor vehi vehicl clee was was subs ubseque equent ntly ly resol esold d for for P27, P27,50 500 0 to Mr. Joey oey who who made an initial payment of P6,875. How much profit was realized on the sale to Mr. Joey? A. P3,025 B. P3,300 C. P3,575 D. P3,850 (Dayag, 2015)
11. The following information are obtained obtained from the books of accounts of E Inc. on June 30, 20x5: deferred gross profit balance of P202,000 P202 ,000 and total collections on installment sales of 440,000. Gross profit rate is cost plus 25%. E uses the installment method of accounting. What is E’s total installment sales for 20x5? A. 1,45 1,450, 0,00 000 0 B. 1,01 1,010, 0,00 000 0 C. 1,44 1,440, 0,00 000 0 D. 1,56 1,560, 0,00 000 0 (CPAR, 2017) 12. 12. Th Thee B com comput puter stor tore star stared ed its its oper operat atio ion n in Janu Januar ary y 1, 20x6 20x6.. Dur During ing the the year year,, it had had cash cash sale saless of P6,8 P6,875 75,0 ,000 00 and and ins install tallme ment nt sales ales of P16, P16,50 500, 0,00 000. 0. B impo imposses a mark ark up on cos cost of 25% 25% for cash sales and and 50% for installment sales. Duri uring 20x6 0x6 installment receiv eivabl able balance amounted to P6,600,000. How much is the realized gross profit for 20x6? A. 2,20 2,200, 0,00 000 0 B. 3,57 3,575, 5,00 000 0 C. 3,30 3,300, 0,00 000 0 D. 4,67 4,675, 5,00 000 0 (CPAR, 2017) 13. On January 1, 1999, Tom Bravo sells 20 acres of farmland for P6,000,000 taking in exc exchang ange a 10% intere erest bearing note. Tom Bravo pur purchas hased the farmland in 198 1984 at a cost of P5,000,000. The note will be paid in three installments of P2,412,690 each Decem cember 31, 31,1999, 99, 200 2000, and 200 2001. How much uch must ust be def deferr erred gross profit at the end of 1999 under the installment method of revenue recognition? A. 1,00 1,000, 0,00 000 0 B. 697,885 885 C. 637,462 462 D. 597,885 885 (CPAR, 2017) 14. Revenues and gains are generally generally recognized recognized when: A. cash cash has has been been recei received ved.. B. cash has been received received and they they have been earned earned through substant substantial ial completion completion.. C. they are realiz realized ed or realizable realizable and and a contract contract has been signed. signed. D. they are realized realized or realizabl realizablee and have been earned through through substant substantial ial completion. (CPAR, 2017)
15. In accounting for sales on consignment, sales revenue and the related cost of goods sold should be recognized by the A. consignor consignor when when the goods goods are shipped shipped to to the consigne consignee. e. B. consignor consignor when when the consignee consignee has sold the the goods. goods. C. consignee consignee when the goods goods are shipped shipped to to the third third party. party. D. consignee consignee when cash is received received from the customer customer.. (CPAR, 2017) 16. When using the installment installment sales method, A. gross profit is deferred until all cash is received, but revenues and costs are recognized in proportion to the cash ca sh collected from the sale. B. gros grosss prof profit it is recog ecogni nize zed d onl only aft after the the amou amount nt of cas cash coll collec ectted exce exceed edss the cost cost of the item sold. C. total revenues and costs are recognized at the point of sale, but gross profit is deferred in proportion to the cash that is uncollected from the sale. D. revenue, costs, and gross profit are recognized proportionally as the cash is received from the sale of product. (CPAR, 2017) 17. The cost recovery recovery method method is A. used only when circumst circumstances ances surrounding surrounding a sale are so uncertain uncertain that earlier earlier recognition is impossible. B. the most most common method method of accounti accounting ng for real real estate estate sales. sales. C. similar similar to to percentagepercentage-of-co of-completi mpletion on accounting. accounting. D. never acceptable acceptable under under generally generally accepted accepted accounting accounting principles principles.. (CPAR, 2017) 18. In this method, the probability probability of recovering product or service costs is remote. A. Cash Cash meth method od B. Inst Instal allm lment ent meth method od C. Profit Profit recover recovery y meth method od D. Cost Cost recov recovery ery method method (CPAR, 2017) 19. In this method, each ach collect ection on a contr ntract is rega egarded as representi nting both a return of cos cost and a reali alization of gross oss profit in the ratio in whic hich these two fact actors ors are found und in the original sales price. A. Cash Cash meth method od B. Inst Instal allm lment ent meth method od
C. Profit Profit recover recovery y meth method od D. Cost Cost recov recovery ery method method (CPAR, 2017)
20. May either be cash ash sale ales and and credi edit sales. The time of sale ale (or the full ull accru crual method) of revenue recognition is applied to this particular type of sales. A. Instal Installme lment nt sales sales B. Regu Regula larr sale saless C. Time Time of sale sale D. Speci Special al sale saless (CPAR, 2017) 21. The installment method of recognizing profit profit for accounting purposes is acceptable if A. Collections Collections in in the year of sale do not exceed exceed 30% of the total total sales price price B. An unreali unrealized zed profit profit account is credit credited ed C. Collection Collection of of the sales sales price price is not reasonabl reasonably y assured assured D. The method method is consistentl consistently y used for all sales sales of similar similar merchandis merchandisee (Punzalan, 2016) 22. Under the cost recovery method of revenue recognition, A. Income is recogniz recognized ed on a proportionate proportionate basis basis as cash is received received on the sale sale of the product B. Income is is recognized recognized when when the cash received received from from the sale sale of the product product is is greater than the cost of the product produc t C. Income Income is recog recogniz nized ed immedi immediate ately ly D. None None of of the these se (Punzalan, 2016) 23. Which of the following are recognized each period under the cost recovery method? A. Cost Costss only only B. Reve Revenu nues es onl only y C. Both Both costs costs and revenue revenuess D. None None of of the these se (Punzalan, 2016)
For Items #24-25, use the following information:
Presented below are the information taken from the books of Kooler Co. 2016 2017 Sales: Re Regular P125,000 P187,500 Installment 62,500 100,000 COGS: Regular 75,000 112.500 Installment 31,250 45,000 Operating Expenses 25,000 31,250 Collections on accounts from: Regular sales Installment sales-2016 Installment sales-2017
100,000 37,500
137,500 25,000 62,500
24. The total realized gross profit profit on installment sales sales for 2017 is A. P 46,8 46,875 75 B. P 93 93,75 ,750 C. P114 P114,3 ,375 75 D. P 87,5 87,500 00 25. Refer to No. 24, the the net income for for 2017 is A. P 78,1 78,125 25 B. P 93 93,75 ,750 C. P 98 98,75 ,750 D. P 90,6 90,625 25 (PRIA Handout 2018)
(Items #26-28, confusing format, not sure if items are under 2016 or 2017) For Items #26-28, use the following information:
The fo The folllo lowi wing ng sel elec ecte ted d ac acco coun untts ap appe pear ared ed in th thee tr tria iall ba bala lanc ncee of Ab Aben enso son n Sa Sale less as of De Dece cemb mber er 31, 2016: Installment receivable-2016 P 15,000; Installment receivable-2017 P 200,000; Begi gin nni nin ng invent nto ory P 70,000 00;; Pur urcchas asees P 55 555 5,000; Rep epo ossessions P 3,000 00;; Regular sales P 385,000; Installment sales P425,000; Deferred gross profit-2016 P 54,000; Additional info in form rmat atio ion: n: Ja Janu nuar ary y 1, 1,20 2017 17,, In Inst stal allm lmen entt re rece ceiv ivab able le-2 -201 016 6 P 12 120, 0,00 000; 0; En Endi ding ng in inve vent ntor ory y of ne new w and an d re repo poss sses esss me merc rcha hand ndis isee P 95 95,0 ,000 00;; Gr Gros osss pr prof ofit it ra rate te on re regu gula larr sa sale less 30 30%. %. Re Repo poss sses essi sion onss wa wass made dur uriing the ye yeaar. It was a 2016 sale and the correspondi din ng unc nco ollect cteed ac acccoun untt at the time of repossession was P 7,750.
26. The gross profit realized realized on collections for installment installment sales in 2016 was A. P 47 47,2 ,250 50 B. P 50,7 50,737 37.5 .50 0 C. P 43,7 43,762 62.5 .50 0 D. P 7,75 750 0 27. Refer to No. 26, the gross profit realized on collections for installment sales in 2017 was A. P 87 87,0 ,075 75 B. P 88,6 88,672 72.5 .50 0 C. P 85 85,5 ,50 00 D. P 263 263,5 ,500 00 28. Refer to No. 26, The loss on repossession made on a 2016 sale sale was A. P 1, 1,26 262. 2.50 50 B. P 48 487. 7.5 50 C. P 1, 1,805 D. P 7,75 750 0 (PRIA Handout 2018) For Items #29-30, use the following information:
These data pertain to installment sales of Mickey’s Store: Downpayment, 20% ■ ■ Installment sales: P545,000 in Year 1; P785,000 in Year 2; and P968,000 in Year 3 Mark-up on cost, 35% ■ ■ Collections after down payment: 40% in the year of sale, 35% in the year after sale, and 25% in the third year. 29. The realized realized gross profit profit in Year 1 is: A. 109, 109,35 357 7 B. 73,474 C. 99,190 D. 114, 114,82 825 5 30. The unrealized gross profit for for installment for installment sales made during during Year 2,as of the end of Year 2 is: A. 97,689 B. 131,880 880 C. 141,112 112 D. 114, 114,06 063 3
(Punzalan, 2016)
31. 31. Chr Chris Co. Co. sell ells equi equipm pmen entt on ins install tallme ment nt cont contrracts acts.. Which hich of the the foll ollowin owing g stat tatemen ements ts best justifies Chris’s use of the cost recovery method of revenue recognition to account for these installment sales? A. The sales contract contract provide providess that title title to the equipment equipment passes passes to the buyer only only when all payments have been made. B. No cash payments payments are due due until one year from the the date of of sale. sale. C. Sales are subject subject to a high high rate rate of return return.. D. There is no reasonabl reasonablee basis for estimat estimating ing collectabil collectability ity (Punzalan, 2018) 32. Winne nner Co. is engage aged in ext extens ensive expl xplora oration for water in Utah. if, upon dis discovery ery of wate water, r, Winne innerr does does not not recog ecogni nize ze any any reven evenue ue from rom wat water sal sales unt until the the sales ales exce exceed ed the the costs of exploration, the basis of revenue recognition being employed is the A. Produ Product ctio ion n basis basis B. Cash Cash (or collec collectio tion) n) basis basis C. Sales Sales (or accrua accrual) l) basis basis D. Cost Cost recov recovery ery basis basis (Punzalan, 2018) 33. 33. Leop Leopar ard d Co. Co. uses uses the ins install tallme ment nt sales ales meth method od to recog ecogni nize ze reven evenue ue.. Cus Custome tomerrs pay pay the inst instal allm lmen entt note notess in 24 equa equall mo mont nthl hly y amou amount ntss, whi which incl includ udee 12% 12% int interes erestt. What What is the the balance of an installment note receivable 6 months after the sale? A. 75% of the the origin original al sales sales price. price. B. Less than 75% 75% of the original original sales price. price. C. The present present value value of the remaining remaining monthl monthly y payments payments discounted discounted at 12%. 12%. D. Less than than the present present value of remaining remaining monthly monthly payments payments discounted discounted at 12%. 12%. (Punzalan, 2018) 34. The method most commonly used to report report defaults and repossessions is A. Provide Provide no basis for the the repossessed repossessed asset asset thereby thereby recognizing recognizing a loss. loss. B. Record the repossessed merchandise at fair value, recording a gain or loss if appropriate. C. Record the the repossessed repossessed merchandis merchandisee at book value, recordin recording g no gain or loss. D. None None of thes these. e. (Punzalan, 2018)
35. According to IAS 18, Revenue, which two of the following criteria must be satisfied before revenue from the sale of goods should be recognized in profit or loss? 1. Revenue Revenue can be meas measure ured d relia reliably bly.. 2. Managerial Managerial control control over the the goods sold has has been been relinquish relinquished. ed. 3. Owners Ownership hip has has been tran transfe sferre rred d to the buyer buyer.. 4. The outco outcome me of the the trans transact action ion is is certai certain. n. A. B. C. D.
1 and 1 and 1 and 3 and
2 3 4 4 (Punzalan, 2018)
36. 36. On Janu Januar ary y 2, 2016 2016,, Col Colt Co. Co. sold old land land that hat cos cost P600 P600,0 ,000 00 for P800 P800,0 ,000 00,, recei eceivi ving ng a note note bearing interest at 10%. The note will be paid in three annual installments of P321,700 star starti ting ng on Dece Decemb mber er 31, 31, 2016 2016.. Beca Becaus usee coll collec ecti tion on of the the note note is very very unce uncert rtai ain, n, Colt Colt will will use use the cos cost recov ecover ery y metho ethod. d. How How mu much ch reven evenue ue from rom this his sale ale shou should ld Colt Colt reco recogn gniz izee in 2016? A. 0 B. 6,000 C. 8,000 D. 20,000 (Punzalan, 2018) 37. On December 31, 2016, Mill Co. sold construction equipment to Drew, Inc. for P1,8 P1,800 00,0 ,000 00.. Th Thee equi equipm pmen entt had had a carr carryi ying ng amou amount nt of P1,2 P1,200 00,0 ,000 00.. Drew Drew pai paid P300 P300,0 ,000 00 cash on December 31, 2016 and signed a P1,500,000 note bearing interest at 10%, payable in five annual installments of P300,000. Mill appropriately accounts for the sale unde underr the the inst instal allm lmen entt meth method od.. On Dece Decemb mber er 31, 31, 2017 2017,, Drew Drew paid paid P300 P300,0 ,000 00 prin princi cipa pall and and P150 P150,0 ,000 00 inter nteres est. t. For For the the year year ende ended d Dece Decemb mber er 31, 31, 2017 2017,, what what total otal amou amount nt of reven evenue ue should Mill recognize from the construction equipment sale and financing? A. 250, 250,00 000 0 B. 150,000 000 C. 120,000 000 D. 100, 100,00 000 0 (Punzalan, 2018) 38. On January 1, 2016, Rex Co. sold a used machine to Lake, Inc. for P525,000. On this date date,, the the mach machin inee had had a depr deprec ecia iate ted d cost cost of P367 P367,5 ,500 00.. Lake Lake paid paid P75, P75,00 000 0 cash cash on Janu Januar ary y
1, 2016 and signed a P450,000 note bearing interest at 10%. The note was payable in three ann annual installments nts of P150,0 0,000 beginning Januar uary 1, 2017. Rex app appropriately acco accoun untted for for the the sale ale unde underr the the inst nstallm allmen entt metho ethod. d. Lake Lake made made a time timely ly paym paymen entt of firs firstt inst instal allm lmen entt on Janu Januar ary y 1, 2017 2017 of P195 P195,0 ,000 00,, whic which h incl includ uded ed inte intere rest st of P45, P45,00 000 0 to date date of payment. At December 31, 2017, Rex had a deferred gross profit of A. 105, 105,00 000 0 B. 99,000 C. 90,000 D. 76,500 (Punzalan, 2018) 39. The books of Harry Harry Co. show the the following balances on December 31, 2016: Accounts Receivable Deferred Gross Profit (before adjustment)
P313,750 38,000
Analysis of the accounts receivable reveal the following: Regular accounts 2015 installment accounts 2016 installment accounts
P207,500 16,250 90,000
Sales on an installment basis in 2015 were made at 30% above cost; in 2016, at 33 ⅓ abov abovee cos cost. Ex Expe pens nses es paid paid was was P1,5 P1,500 00 relat elatiing to ins install tallme ment nt sales ales,, how how mu much ch is the net net income on installment sales? A. P11, P11,00 000 0 B. 11,500 C. P16,000 000 D. 10,250 (Dayag, 2015) 40. On September 30, 2015, Barry bought a car for P3,600,000. A downpayment of P1,600,000 was made with the balance due in 10 monthly installments, the first to be made made at the the end end of oct october ober.. Bar Barry is to make make mont onthly hly paym paymen entts of P200 P200,0 ,000 00 plus plus inter nteres estt on the unpaid balance at 12%. What is the total collection on January 31, 2016? A. P200 P200,0 ,000 00 B. 214,000 000 C. P216 P216,0 ,000 00 D. 218, 218,00 000 0
(Dayag, 2015)
41. Under the installment installment sales sales method, A. revenue, revenue, costs, and gross gross profit are recognized recognized proporti proportionate onate to the cash that is received from the sale of the product. B. gross profit profit is deferred deferred proportion proportionate ate to cash uncollected uncollected from sale sale of the product, but total revenues and costs are recognized at the point of sale. C. gross profit profit is not recogni recognized zed until the the amount of cash received received exceeds exceeds the cost of the item sold. D. revenues revenues and costs are recognized recognized proportion proportionate ate to the cash received received from the sale of the product, but gross profit is deferred until all cash is received. (K, W & W) 42. 42. Slic Slick' k'ss Us Used ed Car Cars sel sells prepre-ow owne ned d cars cars on the inst nstallm allmen entt bas basis and and car carries ies its its own own not notes because its customers typically cannot qualify for a bank loan. Default rates tend to be high or unpredictable. However, in the event of nonpayment, Slick's can usually repossess the cars without loss. The revenue method Slick would use is the: A. Instal Installme lment nt sales sales meth method. od. B. Cost Cost recover recovery y method. method. C. Point Point of sales sales method. method. D. Comple Completed ted contr contract act metho method. d. (S, S & T) 43. When assets that sold and accounted for by the installment method are subsequently repossessed and returned to inventory, they should be recorded on the books at A. Sell Sellin ing g pri price ce.. B. The amount of the installmen installmentt receivable receivable less associated associated deferred deferred gross gross profit. profit. C. Net realiz realizabl ablee value. value. D. Net realiza realizable ble value value minus minus normal normal profit. profit. (Gleim) 44. Pie Co. uses the installment sales method to recognize revenue. Customers pay the inst instal allm lmen entt note notess in 24 equa equall mo mont nthl hly y amou amount ntss, whi which incl nclude ude 12% 12% inte interrest. est. What What is an installment notes receivable balance six months after the sale? A. 75% of the the origin original al sales sales price. price. B. Less than 75% 75% of the original original sales price. price. C. The present present value value of the remaining remaining monthl monthly y payments payments discounted discounted at 12%. 12%. D. Less than than the present present value of the remaining remaining monthly monthly payments payments discounted discounted at 12% (AICPA 1192T-9)
45. 45. Gent Gentry ry Co. Co. uses uses the the ins install tallme ment nt sales ales meth method od.. When When an acco accoun untt had had a bal balance ance of P3,5 P3,500 00,, no furt urther collect ections could uld be made and the dining room set was repo epossessed. At that tim time, it was est estimat imated ed that that the dini dining ng room room set coul could d be sold sold for P1,0 P1,000 00 as repo reposs sses esssed, ed, or for for P1,3 P1,300 00 if the com company pany spent pent P125 P125 recon econdi diti tion oniing it. it. Th Thee gros grosss prof profiit rate ate on this this sale ale was 70%. What is the gain or loss on repossession? A. 2,45 2,450 0 los losss B. 2,50 2,500 0 los losss C. 300 ga gain D. 125 125 gai gain (Punzalan, 2018) For Items #46-47, use the following information:
Baker Co. is a real estate developer that began operations on January 2, 2016. Baker appr approp opri riat atel ely y uses uses the the inst instal allm lmen entt meth method od of reve revenu nuee reco recogn gnit itio ion. n. Bake Baker’ r’ss sale saless are are made made on the the basis of a 10% Down Payment, with the balance payable over 30 years. Baker’s gross profit percentage is 40%. Relevant information for baker’s first two years of operations operations is as follows: Sales 2017 - P16,000,000 Sales 2016 - P14,000,000 Cash Collections 2017 - P2,020,000 Cash Collections 2016 - P1,400,000 46. At Dec. 31, 2016, Baker’s deferred gross gross profit was A. 5,04 5,040, 0,00 000 0 B. 5,60 5,600, 0,00 000 0 C. 8,40 8,400, 0,00 000 0 D. 12,6 12,600 00,0 ,000 00 47. Baker’s realized Gross Profit for 2017 was was A. 6,40 6,400, 0,00 000 0 B. 2,02 2,020, 0,00 000 0 C. 1,21 1,212, 2,00 000 0 D. 808, 808,00 000 0 (Punzalan, 2018) For Items #48-50, use the following information:
QR Appl pplianc iances es sells ells home home thea theate terr set set both both on ins install tallme ment nt and and cash cash basi basiss. Mr. Mr. X pur purchas chased ed a set set from QR Appliances on March 30, 2015 015 for P36 P367,500 500 which has has a cos cost of P289,80 ,800. A use used set is accept epted as down paym ayment, P89, 89,600 being eing all allowed on the trade in. The used set can be resold for P11 P112,140 140 after recondi nditioning cost ost of P5,362. 62. The company expec pects to make a 20% Gross Profit on the sale of the of used set. The balance of the sale is to be paid on a 10 month
inst instal allm lmen entt basi basiss star starti ting ng May May 1, 2015 2015.. Mr. Mr. X defa defaul ulte ted d paym paymen entt star starti ting ng Nove Novemb mber er 1, 2015 2015 and and the the set set was was imme immedi diat atel ely y repos eposssess essed. ed. Th Thee repo reposssess essed merch erchan andi disse was was appr apprai aise sed d at a valu valuee of P65,625 at the time of repossession. QR had to incur additional cost of repairs amounting to P6,475 before the car was subsequently resold on December 1, 2015 for P90,125 cash to Mr. Y. 48. What is the adjusted installment sales sales price? A. 84,350 B. 362,250 250 C. 367,500 500 D. 390, 390,04 040 0 49. How much is the realized gross gross profit on the sale sale to Mr. X? A. 68,243 B. 45,470 C. 52,363 D. 50,218 50. Compute for the net income to be recognized for the year 2015 A. 69,293 B. 44,940 C. 51,415 D. 68,243 (CPAR 0310)
51. Asser Computer Co. bega egan operations at the begi eginni nning of 2016. Duri uring the year ear, it had cash sales of P6,875,000 and sales on installment basis of P16,500,000. Asser adds a markup on cost of 25% on cash sales and 50% on installment sales. Installment receivable at the end of 2016 is P6,600,000. Total realized gross profit for 2016 is: A. P1,3 P1,375 75,0 ,000 00 B. P3,3 P3,300 00,0 ,000 00 C. P4,6 P4,675 75,0 ,000 00 D. P3,5 P3,575 75,0 ,000 00 (Dayag, 2015) 52. 52. The Cent Centra rall Plai Plains ns Subdi Subdivi visi sion on sell sellss resi residen denti tial al subd subdiv ivis isio ion n lots lots on inst instal allm lmen entt basi basis. s. Th Thee following information was taken from the company’s records as at December 31, 2016: Installment Accounts Receivable January 1, 2016
P 75 5 ,00 0
December 31, 2016 Unrealized Gross Profit, January 1, 2016 Installment Sales
8 4 0 ,0 0 0 33 9 ,7 50 9 5 0 ,0 0 0
How much is the balance of Unrealized Gross Profit as at December 31, 2016? A. P378 P378,0 ,000 00 B. P339 P339,7 ,750 50 C. P427 P427,5 ,500 00 D. P389 P389,2 ,250 50 (Dayag, 2015) 53. Gema Inc. began gan oper perati ations on January ary 1, 2016 and appro propriate ately use uses the installment method of accounting. The following data are available for 2016: Inst nstallm allmen entt Acc Accou ount ntss Rec Recei eiva vabl ble, e, 12/3 12/31/ 1/20 2016 16 Installment sales for 2016 Gross profit on sales
P600 P600,0 ,000 00 1,050,000 40 %
Under the installment method, Gema’s deferred gross profit at December 31, 2016 is: A. P360 P360,0 ,000 00 B. P270 P270,0 ,000 00 C. P240 P240,0 ,000 00 D. P180 P180,0 ,000 00 (Dayag, 2015) 54. 54. Jane Jane En Ente terp rprrises ises uses uses the ins install tallme ment nt met method hod of acco accoun unti ting ng and and it has has the the follo ollowi wing ng data data at year-end: Gross Margin on cost Unrealized Gross Profit Cash collections including down payments
66 2/3% P 19 2 ,00 0 360 ,000
What was the total amount of sales on installment basis? A. P480 P480,0 ,000 00 B. P552 P552,0 ,000 00 C. P648 P648,0 ,000 00 D. P840 P840,0 ,000 00 (Dayag, 2015)
55. 55. Spi Spicer cer Co. Co. has has a nor normal mal gros grosss prof profit it on insta nstalllmen lmentt sales ales of 30%. 30%. A 2014 2014 sales ales resul esultted in a default ear early in 201 2015. At the date ate of def defaul ault, the bal balanc ance of the installment recei ceivab vable was was P24, P24,00 000, 0, and and the the repo reposs sses esse sed d merc mercha hand ndis isee had had a fair fair valu valuee of P13, P13,50 500. 0. As Assu sumi ming ng the the repo reposssess essed merch erchan andi disse is to be reco record rded ed at fair air valu value, e, the the gain gain or los loss on repo reposs sses esssion ion should be: A. P0 B. P3,3 P3,300 00 gain gain C. A P3, P3,30 300 0 los losss D. A P7,5 P7,500 00 los losss (Dayag, 2015) 56. Coas oaster manufa ufactu ctures and sells loggin ging equ equipment. Due to the nature of its bus business, Coas oaster is unabl able to reliably predic dict bad debt ebts. Duri uring 2015, Coas oaster sold equ equipment cost costin ing g P2,4 P2,400 00,0 ,000 00 for for P3,6 P3,600 00,0 ,000 00.. Th Thee term termss of the the sale sale were were 20%, 20%, with with equa equall paym paymen ents ts due quarterly over the next 3 years. All payments for 2015 were made on schedule. Round answers to two places. Assumi Assu ming ng that that Coas Coaste terr uses uses the the inst instal allm lmen entt meth method od of accou account ntin ing g for for its its inst instal allm lmen entt sale sales, s, what amou amoun nt of reali alized gross oss profit will Coaster repor port in its income statement for the year ended December 31, 2015? A. P1,6 P1,680 80,0 ,000 00 B. P1,1 P1,120 20,0 ,000 00 C. P560 P560,0 ,000 00 D. P369 P369,6 ,600 00 (Dayag, 2015) 57. Assuming the same information in the previous number, and that Coaster uses the cos cost-recover very method of accoun ounting for its installment sale ales, what hat amount of real ealized gross profit will Coaster report in its income statement for year ended December 31, 2016? A. P0 B. P240 P240,0 ,000 00 C. P316 P316,8 ,800 00 D. P960 P960,0 ,000 00 (Dayag, 2015) 58. On January 15, 2015, AA Co. enters into a contract to build custom equipment of BB Co.. Co.. Th Thee cont contrract act speci peciffied ied a deli delive verry date date of Marc March h 1. Th Thee equi equipm pmen entt was not not del deliver ivered ed
unt until Marc arch 31. The contr ntract requ equired full payment of P150, 50,000 30 day days after deliver very. This contract should be recorded on A. Janua January ry 1, 201 2015 5 B. Marc March h 1, 1, 201 2015 5 C. Marc March h 31, 31, 201 2015 5 D. Apri Aprill 30, 201 2015 5 (Dayag, 2015) 59. 59. CC Com ompu putters ers manu manuffact actures ures and and sell ells page pagers rs and and radi radio o pagi paging ng syst ystems ems whi which incl includ udee a 180 180 day day warr warran antty on prod produc uctt defe defect ctss. It also also sell ells an exte extend nded ed war warranty anty whic which h prov provid ides es an addi addittiona ionall two year yearss of prot protec ecti tion on.. On May May 10, 10, it sol sold a pagi paging ng syst ystem for P4,6 P4,620 20 and and an extended warr arrant anty for anot nother her P1,44 ,440. The journal ent entry to recor cord this transact action would include A. A credit credit to service service revenue of P6,060 P6,060 B. A credit credit to serv service ice revenu revenuee of P1,440 P1,440 C. A credit credit to sales sales of P4,620 and and a credit to to service service revenue of of P1,440 D. A credit credit to unearned unearned service service revenue revenue of of P1,440 P1,440 (Dayag, 2015) 60. On July 31, EE Co. contracted to have two products built by FF Co. for a total of P222 P222,0 ,000 00.. Th Thee cont contra ract ct speci peciffies ies that that paym paymen entt will will only only occu occurr afte afterr both both prod produc ucts ts have have been transferred to EE Co. EE determines that the standalone prices are P120,000 for Product 1 and P102,000 for Product 2. On August 1, when Product 1 has been transferred, the journal entry to record this event include a A. Debit to Accounts Accounts receivable receivable for for P120,000 P120,000 B. Debit to Accounts Accounts receivable receivable for for P102,000 P102,000 C. Debit to Contrac Contractt Assets Assets for P102,000 P102,000 D. Debit to Contract Contract Assets Assets for for P120,000 P120,000 (Dayag, 2015) 61. A type of sale which provides for a series of payments over a period of time. time. A. Cred Credit it sale sale B. Auct Auctio ion n sal salee C. Inst Instal allm lment ent sale sale D. Bart Barter er sal salee (Guerrero, 2013)
62. In installment installment sale, revenue is recognized: A. At the point point of sale. sale. B. After After the point point of sale sale.. C. Before Before the point point of sale sale.. D. All All of the the above above.. (Guerrero, 2013)
63. Under the cost recovery method, revenue is recognized until: A. Collections Collections are are equal to to the amount amount of cost of of goods sold. sold. B. Collections Collections are more more than the the cost of of goods sold. C. Collections Collections are less less than than the cost cost of goods goods sold. sold. D. The selli selling ng price price is collec collected ted.. (Guerrero, 2013)
64. Incom omee recog cognized using the inst nstallment meth ethod of accou counting generally equa quals cash collected multiplied by the A. net operating operating profit profit percentage. percentage. B. net operating operating profit profit percentage percentage adjusted adjusted for expected uncollecti uncollectible ble accounts. accounts. C. gross gross profit profit percent percentage. age. D. gross profit profit percentage percentage adjusted adjusted for expected expected uncollectibl uncollectiblee accounts. (AICPA) 65. Under der this method, cas cash coll ollection is regarded as a part artial recov covery of cost and a part artial realization of profit. A. Cost Cost recov recovery ery method method B. Gross Gross profit profit real realiza izatio tion n method method C. Inst Instal allm lment ent meth method od D. None None of the the abov abovee (Guerrero, 2013) 66. Vic Corporation, which began business on January 1, 2015, appropriately uses the installment sales method of accounting. The following data d ata are available: 12/3 12/31/ 1/20 2015 15 12/3 12/31/ 1/20 2016 16
Balance of deferred gross profit on sales account: accoun t: 2 01 5
P300,000 P3
2016 Gross profit rate on sales
P 1 20 ,000 440,000
30%
40%
The installment accounts receivable balance at December 31, 2016 is A. P1,0 P1,000 00,0 ,000 00 B. 1,10 1,100, 0,00 000 0 C. 1,40 1,400, 0,00 000 0 D. 1,50 1,500, 0,00 000 0 (Dayag, 2015) For Items #67-68, use the following information:
Dudo Dudong ng Elec Electr tron oniics makes akes all all of its its sales ales on cred credit it and and acco accoun untts for them them usin using g the the inst nstallm allmen entt sales meth ethod. od. For simplicity, assume that all sales occ occur on the first day of the yea year and that all all cash ash col collections are made on the last day of the yea year. Dudon dong Elect ectronics char harges ges 18% interest on the unpaid installment balance Data for 2015 and 2016 are as follows: 2015
Sale Saless Cost of goods sold
2016
P100 P100,0 ,000 00
P120 P120,0 ,000 00
60 ,000
80,000
40 ,000
50,000
Cash collections (principal and interest) 2015 sales 2016 sales
90,000
67. The interest interest income recognized recognized in 2016 amounted to: A. P14, P14,04 040 0 B. 21,600 C. 35,640 D. 49,700 68. Compute the realized realized gross profit in 2016: A. P14, P14,38 384 4 B. 22,800 C. 37,184 D. 39,600 (Dayag, 2015)
69. Carlos Labung Appliance Co. sold a stove, costing P1,000 for P1,600 on September 2012. The downpayment was P160, and the same amount was to be paid at the end of eac each succee ceeding month. Interest was charged on the unpai paid balan alancce of the contr ntract at ½ of 1% a mont onth, paym ymen entts being consider dered as applying first to accr ccrued ued inte nterest and the balance to principal.
After paying a total of P640, the customer defaulted. The stove was repossessed in Feb Februar uary 2013 013. It was estimated that the stove had had a value of P56 P560 on a dep depreci eciated cost basis. The realized gross profit and the gain(loss) on repossession on December 31, 2013 are: A. P232.76 P232.76 and (P52.0 (P52.07) 7) B. P240 P240 and and (P5 (P52.0 2.07) 7) C. P232. P232.76 76 and (P40 (P40)) D. P240 P240 and and (P40 (P40)) (Guerrero, 2013) 70. The Bengal Furniture Company appropriately used the installment sales method in acco accoun untting ing for the follo ollowi wing ng ins install tallme ment nt sal sale. Dur During ing 2013 2013 Beng Bengal al sol sold furni urnitture ure to an individual for P3,000 at a gross profit of P1,200. On June 1, 2013, this installment account receivable had a balance of P2,200 and it was determined that no further collections would be made. Bengal therefore repossessed the merchandise. When reacquired, the merchandise was appraised as being worth only P1,000. In order to impr improv ovee its its sala salabi bili lity ty,, Beng Bengal al incu incurr rred ed cost costss of P100 P100 for for reco recond ndit itio ioni ning ng.. What What shou should ld be the loss on repossessions attributable to this merchandise? A. B. C. D.
P 22 0 P 3 20 P 8 80 P1,100 (Guerrero, 2013)
(Items 71-73, not aligned with the topic assigned) 71. Which of the following is least likely an acceptable method of measuring progress in accordance with PFRS 15? A. Relat Relationshi ionship p between costs costs incurred incurred to date and total total expected expected costs. B. Sur Survey veyss of wor work k perfor performed. med. C. Indepe Independent ndent appraisal appraisal of value value of work performe performed d in relation relation to the contract contract price. price. D. The amount of progress progress billin billings gs in relation relation to the total total contract contract price. (Millan, 2016) 72. At contract inception, PFRS 15 requires an entity to determine how the performance obllig ob igat atio ions ns ide dent ntif ifie ied d in the co cont ntra ract ct wil illl be sat atis isfi fied ed.. Ac Acco corrdi ding ng to PF PFRS RS 15 15,, ho how w do does es an entity satisfy a performance obligation in a long-term construction contrac?
A. B. C. D.
Over tim Over imee At a poin pointt in in tim timee Dism Di smis issa sall ti time me Eith Ei ther er A or or B (Millan, 2016)
73. Acco corrdi din ng to PFRS 15 Reven enu ue from Contract ctss with Customer erss, how should an ent ntiity account for revenue form long-term construction contracts? A. An en enti titty rec ecog ogni nize zess rev even enue ue fr from om lon ongg-te term rm co cons nstr truc ucttio ion n co cont ntrrac acts ts by us usin ing g th thee percentage of completion method. B. An entity recognizes revenue from long-term construction contracts by using zero-profit method. C. A or B D. An en enttit ity y rec ecog ogni nize zess re reve venu nuee fr from om lo long ng--te terrm co cons nstr truc ucttio ion n co cont ntrrac actts ei eitthe herr ov over er time or at a point in time depending on how the performance obligation is satisfied. (Millan, 2016) 74. Under the installment sales method, realized gross profit is computed as A. Sale price less Cost of goods goods sold sold B. Gross profit profit rate rate divided divided by Collection Collection on on sale C. Gross profit profit rate multiplied multiplied by by Collection Collection on on sale D. Excess of collection collection over Cost Cost of goods goods sold sold (Millan, 2016)
75. 75. Unde Underr the the insta nstalllmen lmentt sales ales meth method od,, when hen merc mercha hand ndiise prev previo ious uslly sold old is repo reposssess essed, ed, the repossessed merchandise is recorded at A. Fair Fair valu valuee B. Orig Origin inal al cos costt C. Curr Curren entt cos costt D. Any Any of of the these se (Millan, 2016) 76. MM Company began operations on January 1, 2011 and appropriately uses the installment method of accounting. The following data are available for 2011 and 2012
Installment sales
2011
2012
P1,200,000
P1,500,000
400,000
500,000
Cash collections from: 2011 sales 2012 sales
600,000
Gross profit on sales
30%
40%
The realized gross profit for 2012 is A. P240 P240,0 ,000 00 B. 390,000 000 C. 440,000 000 D. 600, 600,00 000 0 (Dayag, 2013)
77. TT Company, which began business on January 1, 2011, appropriately uses the installment sales method of accounting. The following data d ata are available for 2011: Installment accounts receivable, 12/31/11
P200,000
Deferred gross profit, 12/31/11 (before recognition of realized gross profit)
140,000
Gross profit on sales
40%
The cas The cash col collect lectio ions ns and and the the real ealized ized gros grosss prof profit it on insta nstall llme ment nt sales ales for for the year year ende ended d December 31, 2011 should be Cash Collections
Realized Gross Profit
A.
P100,000
P80,000
B.
100,000
60,000
C.
150,000
80,000
D.
150,000
60,000 (Dayag, 2013)
78. Lane Company, which began operations on January 1, 2011, appropriately uses the installment method of accounting. The following information pertains to Lane’s operations for the year 2011: Installment sales
P1,000,000
Regular sales
600,000
Cost of installment sales
500,000
Cost of regular sales
300,000
General and administrative expenses
100,000
Collections on installment sales
200,000
The deferred gross profit account in Lane’s December 31, 2011 balance sheet should be: A. P150 P150,0 ,000 00 B. 320,000 000 C. 400,000 000 D. 500, 500,00 000 0 (Dayag, 2013) (Items 79-80, not aligned with the topic assigned) 79. Mediocr cree Inc. has entered into a ver ery y pr pro ofitable fixe xed d price con onttract for co con nstruc uctting a high hi gh-r -ris isee bu buil ildi ding ng ov over er a pe peri riod od of th thre reee ye year ars. s. It in incu curs rs th thee fo foll llow owin ing g co cost stss re rela lati ting ng to th thee contract during the first year: Cost of material = P2.5 million ■ Site labor cost = P2.0 million ■ Agre Ag reed ed ad admi mini nist stra rati tive ve co cost stss as pe perr co cont ntra ract ct to be re reim imbu burs rsed ed by th thee cu cust stom omer er = P1 ■ million. ■ Depreciation of the plant used for the construction = P0.5 million Marketing costs for selling apartments, when they are ready = P1.0 million ■ Total estimated cost of the project = P18 million. ■ The percentage of completion of this contract at the year-end is: A . 33 ⅓ % B. 27% C. 25% D . 39% (Dayag, 2013) 80.. Da 80 Dant ntee Co Cons nstr truc ucti tion on Co Comp mpan any y us uses es th thee pe perc rcen enta tage ge of co comp mple leti tion on me meth thod od of ac acco coun unti ting ng.. During 2011, Dant ntee contacted to bu buiild an apa parrtment house for Rizza for P10 10,,000, 0,0 0 00 .
Dante estimated that total costs would amount to P8,000,000 over the period of const con stru ruct ctio ion. n. In co conn nnect ectio ion n wi with th th this is con contr tract act,, Dan Dante te in incur curre red d P1, P1,00 000,0 0,000 00 of con const stru ruct ctio ion n cost co stss du duri ring ng 20 2011 11.. Da Dant ntee bi bill lled ed an and d co coll llec ecte ted d P1 P1,5 ,500 00,0 ,000 00 fr from om Ri Rizz zzaa in 20 2011 11.. Ho How w mu much ch gross profit should Dante recognize in 2011? A. P3 P300 00,0 ,000 00 B. 250,00 000 0 C. 187,50 500 0 D. 12 125, 5,00 000 0 (Dayag, 2013 (CHUA, CATALINA FAYE DILODILO 81-90) (Items 91-97, not aligned with the topic assigned) 91. Statement 1: “Step 2” of the recognition principles of PFRS 15 is the allocation of the transaction price to the performance obligations in the contract. Statem Stat emen entt 2: PF PFRS RS 15 re requ quir ires es th that at re reve venu nuee fr from om al alll lo long ng-t -ter erm m co cons nstr truc ucti tion on co cont ntra ract ctss be recognized using the percentage of completion method A. Onl Only y state statemen mentt 1 is is true true B. Onl Only y state statemen mentt 2 is tru truee C. Bo Both th are are fal false se D. Bo Both th are are tru truee (Milan, 2016) 92.. St 92 Stat atem emen entt 1: Ac Acco corrdi ding ng to PF PFRS RS 15 15,, a mea eassur uree of pr prog ogre resss ba base sed d on the ho hour urss ex expe pend nded ed on the contract is an application of the inputs method. Statem Stat emen entt 2: Ac Acco corrdi ding ng to PF PFRS RS 15 Re Reve venu nuee fr from om Co Cont ntra ract ctss wi with th Cu Cussto tome mers rs co cont ntrrac actts are generally combined and accounted for as a single contract. A. Onl Only y state statemen mentt 1 is is true true B. Onl Only y state statemen mentt 2 is tru truee C. Bo Both th are are fal false se D. Bo Both th are are tru truee (Milan, 2016) 93. Which of the following may affect the revenue recognized on a construction contract? A. Co Cont ntra ract ct pr pric icee B. Ch Chan ange ge ord order erss C. Es Escal calat atio ion n clause clausess
D. Al Alll of of the these se (Milan, 2016)
94. Under the zero profit profit method, contract revenue for the period is A. Eq Equa uall to ze zero ro B. Equal to the the costs of constructio construction n recognized recognized during during the period period C. Equal to the contract contract price price divided divided by the estimated estimated constructio construction n period D. Equal to the costs of construct construction ion recognized recognized during the period period that are probable probable of recovery (Milan, 2016) 95. Under the percentage of completion method, contract revenue revenue for the period is computed A. Relat Relationshi ionship p between costs costs incurred incurred to date and total total expected expected costs B. Sur Survey veyss of wor work k perfo performe rmed d C. Indepe Independent ndent appraisal appraisal of value value of work performe performed d in relation relation to the contract contract price D. The amount of progress progress billin billings gs in relation relation to the total total contract contract price (Milan, 2016) 96. Any expected loss loss on a const constructi ruction on contract is A. Recogni Recognized zed as an expense immediat immediately ely as an adjustment adjustment to the revenue revenue already already recognized B. Defer Deferred red and amortize amortized d over the remaini remaining ng constructi construction on period period C. Recogni Recognized zed as an expense expense immediatel immediately y in accordance accordance with with PFRS 15. D. Recogni Recognized zed as a provisi provision on in accordance accordance with PAS PAS 37 E. Igno norred (Milan, 2016) 97. Which of the following does not indicate that a promise to transfer a good or service service is separately identifiable? A. The good or service service is is not an input input to a combined combined output specif specified ied by the customer B. The good or service service does not signif significantl icantly y modify another another good or service service promised in the contract C. The customer’s customer’s decisio decision n of not purchasing purchasing a good or service service affects affects the other promised goods or service in the contract. (Milan, 2016) For Items #98-100, use the following information:
Johnson Enterprises uses the cost recovery method for all installment sales. Complete the table:
2014
2015
2016
P80,000
P95,00
P?
Cost of installment sales
P?
56,050
68,250
Gross profit percentage
38%
?
35%
25,600
46,400
5,600
22,800
?
Installment sales
Cash collections: 2014 sales 2015 sales 2016 sales Realized Gross Profit on Installment Sales
32,550 ?
?
16,050
98. The installmen installmentt sales in 2016 A. P92, P92,13 137. 7.5 5 B. 105,000 000 C. 112, 112,61 612. 2.5 5 D. 195, 195,00 000 0 99. The cost of installment installment sales sales in 2014 is A. Zero B. P30,400 400 C. P47,619 619 D. P49, P49,60 600 0 100. 100.
The gros The grosss pro profi fitt rat ratee in in 2015 2015 is A. 29% B. 41% C. 59% D. Cannot Cannot be determ determine ined d (Dayag, 2016)
101. 101.
The insta The install llme ment nt meth method od of reco recogn gniz izin ing g revenu revenuee A. Should be used only in cases in which no reasonable basis exists for estimating the collectibility of receivables. B. Is not a generally generally accepted accepted accounting accounting principle principle under under any circumstance circumstances. s. C. Should be used used for book book purposes purposes only if it is used used for tax purpose purposes. s. S, S & S D. Is an acce accept ptab able le alte altern rnat ativ ivee acco accoun unti ting ng prin princi cipl plee for for a firm firm that that make makess inst instal allm lmen entt sales. (Tan, 2017)
102.
The instal installment lment method of recogniz recognizing ing profit profit for accounting accounting purpose purposess is acceptable acceptable if if A. Collections Collections in in the year of sale do not exceed exceed 30% of the total total sales price. price. B. An unreali unrealized zed profit profit account is credit credited. ed. C. Collection Collection of the the sales price is not reasonably reasonably assured. assured. D. The method method is consistentl consistently y used for all sales sales of similar similar merchandis merchandise. e.
103. 103.
When When usi using ng the the ins insta tall llme ment nt sal sales es met metho hod, d, A. Gross profit is deferred until all cash is received, but revenues and costs are recognized in proportion to the cash ca sh collected from the sale. B. Gros Grosss prof profit it is reco recogn gniized zed onl only afte afterr the amou amount nt of cash cash col collect lected ed exce exceed edss the the cos cost of the item sold. C. Revenue, costs, and gross profit are recognized proportionally as the cash is received from the sale of product. D. Total revenues and costs are recognized at the point of sale, but gross profit is deferred in proportion to the cash that is uncollected from the sale.
104. Spicer Corpora oration has a nor normal gross profi ofit on inst nstallment sale ales of 30%. A 2014 sale ale result ulted in a default early in 201 2015. At the date of default, the balance of the installment ent receiv eivabl able was P24,000 and the repossessed mercha chandise had a fair value of P13 P13,500. 00. Asssum As umin ing g the repo reposssess essed merch erchan andi disse is to be reco record rded ed at fair fair val value, ue, the the gai gain or los loss on repossession should be: A. P0 B. P3,3 P3,300 00 loss loss C. P5,0 P5,000 00 loss loss D. P7,5 P7,500 00 loss loss (Dayag, 2015) 105. Western Appliance Company, which began business on January 1, 2006, appr approp oprriate iately ly uses uses the the ins install tallme ment nt sales ales meth method od of acco accoun untting. ing. Th Thee fol followi lowing ng dat data are are available for 2006: Installment sales $ 3 5 0 ,0 0 0 Cash collections on installment sales 150 ,000 Gross profit on sales 40% The gross profit on installment sales for 2006 should be: A. Realized: Realized: $60,000; $60,000; Deferr Deferred: ed: $80,000 B. Realiz Realized: ed: $80,000 $80,000;; Deferred Deferred:: $60,000 $60,000 C. Realized: Realized: $140,000; $140,000; Deferred: Deferred: $80,000 D. Realized: Realized: $140,000; $140,000; Deferred: Deferred: 60,000
(highered.mheducation.com, 2007)
106. The Pattison Company began gan operations on Janua nuary 2, 200 2006, and appr ppropr opriately use uses the the inst instal allm lmen entt sale saless meth method od of acco accoun unti ting ng.. Th Thee foll follow owin ing g data data are are avai availa labl blee for for 2006 2006 and and 2007: 2006 2007 Installment sales $600,000 $750,000 Cash collections from: 2006 sales 200,000 250,000 2007 sales 300,000 Gross profit on sales 30% 40% The deferred gross profit that would appear in the 2007 balance sheet is: A. $180 $180,0 ,000 00 B. $200 $200,0 ,000 00 C. $285 $285,0 ,000 00 D. $225 $225,0 ,000 00 (highered.mheducation.com, 2007) 107. In 201 2013, Mercha chandise was sold by on installment basi asis by MB Com ompa pan ny for P80,000 000 at a gross oss profit of 25% 25% of cos cost. During the year, a total of P42 P42,500 including interest of P12, P12,50 500 0 was was coll collec ectted on this this cont contrract. act. In 2013 2013,, no coll collec ecttion ion was was made made on this this sal sale, and and the merchandise was repossessed. The FV of the merchandise is P34,000 after reconditioning cost of P4,000. What is the gain (loss) on repossession? A. (P10 (P10,0 ,000 00)) B. (P14, P14,00 000) 0) C. P10,000 000 D. (P20 (P20,0 ,000 00)) (Guererro, 2013) 108. BMW Corporation sells car on a three year inst nstallment sales contr ntract. On Decem cember 31, 31, 2013 2013,, the the last ast day day on BMW’ BMW’ss firs firstt year year of oper operat atio ions ns,, the the res results ults of oper operat atiions ons bef before ore adjustment are summarized as follows Sales 1,000,000 Cost of Installment Sales 700,000 Operating Expenses 8 0 ,0 0 0
The tota The totall coll collec ecti tion onss duri during ng the the year year incl includ udin ing g inte intere rest st and and fina financ ncin ing g char charge gess of P100 P100,0 ,000 00 is P500,000. What is the net income of BMW Corp for the year ended December 31, 2013? A. P220 P220,0 ,000 00 B. P140 P140,0 ,000 00 C. P150 P150,0 ,000 00 D. P120 P120,0 ,000 00 (Guererro, 2013) 109. The following informati ation are obt obtain ained from the books of accou counts of Robin bin Inc. on June 30, 2013: Deferred gr gross p prrofit ba balance (A (After Ad Adjustment) 202 ,000 Total Collection on Installment Sales 44 0 ,00 0 Gross Profit based on cost 25% Robi Robin n Inc uses uses the the inst instal allm lmen entt metho ethod d of acco accoun unti ting ng.. What hat is Robi Robin’ n’ss tot total insta nstalllmen lmentt sales for 2013? A. P1,5 P1,560 60,0 ,000 00 B. P1,4 P1,440 40,0 ,000 00 C. P1,4 P1,450 50,0 ,000 00 D. P1,0 P1,010 10,0 ,000 00 (Guererro, 2013) 110. JJ Company sold goods on installment. For the year ended, the following were reported: Installment Sales P3,000,000 Cost of Installment Sales 2,025,000 Collections on Installment Sales 1,800,000 Repossessed Accounts 200,000 FV of repossessed merchandise 120,000 The repossession resulted to: A. Gain Gain of P5,00 P5,000 0 B. Lo Loss ss of P80, P80,000 000 C. No Gain Gain;; No Lo Loss ss D. Lo Loss ss of P15, P15,000 000 (Guererro, 2013)
111. Pie Co. uses the installment sales method to recognize revenue. Customers pay the inst instal allm lmen entt note notess in 24 equa equall mo mont nthl hly y amou amount ntss, whi which incl includ udee 12% 12% int interes erestt. What hat is an installment notes receivable balance six months after the sale? A. 75% of the the origin original al sales sales price. price. B. Less than 75% 75% of the original original sales price. price. C. The present present value value of the remaining remaining monthl monthly y payments payments discounted discounted at 12%. 12%. D. Less than than the present present value of remaining remaining monthly monthly payments payments discounted discounted at 12%. 12%. (AICPA 1192T-9) 112. 112.
The insta The install llme ment nt meth method od of reco recogn gniz izin ing g revenu revenuee A. shoul hould d be used used onl only in case casess in whic which h no reas easonab onable le bas basis exi exists sts for est estimat imatin ing g the the collectibility of receivables. B. is not a generally generally accepted accepted accounting accounting principle principle under any circums circumstances tances.. C. should should be used for book book purposes purposes only only if it is used used for tax tax purposes. purposes. D. is an acce accept ptab able le alte altern rnat ativ ivee acco accoun unti ting ng prin princi cipl plee for for a firm firm that that make makess inst instal allm lmen entt sales. (S, S & S)
113. Slick's Used Cars sells pre-owned cars on the installment basis and carries its own note notess beca becaus usee its its cust custom omer erss typi typica call lly y cann cannot ot qual qualif ify y for for a bank bank loan loan.. Defa Defaul ultt rate ratess tend tend to be high or unpredictable. However, in the event of nonpayment, Slick's can usually repossess the cars without loss. The revenue method Slick would use is the: A. Instal Installme lment nt sales sales meth method. od. B. Point Point of sales sales method. method. C. Cost Cost rec recov over ery y D. Comple Completed ted contrac contractt (S, S & S) 114. 114.
When When usi using ng the the ins insta tall llme ment nt sal sales es met metho hod, d, A. Gross profit is deferred until all cash is received, but revenues and costs are recognized in proportion to the cash ca sh collected from the sale. B. Gros Grosss prof profit it is reco recogn gniized zed onl only afte afterr the amou amount nt of cash cash col collect lected ed exce exceed edss the the cos cost of the item sold. C. Revenue, costs, and gross profit are recognized proportionally as the cash is received from the sale of product. D. Total revenues and costs are recognized at the point of sale, but gross profit is deferred in proportion to the cash that is uncollected from the sale. (S, S & S)
115.. 115
Cash Cash collec collectio tion n is a crit critica icall event event for for incom incomee recogni recognitio tion n in the the A
B
C
D
Cost-recovery method
No
Yes
No
Yes
Installment method
No
Yes
Yes
No (AICPA 1193 T- 39)
116.
For financial financial statement statement purposes, purposes, installmen installmentt method method of accounti accounting ng may may be used if: A. Collection Collection period period extends extends over more more than 12 months. months. B. Installmen Installments ts are are due in differ different ent years. years. C. Ultimate Ultimate amount amount collect collectible ible is is indeterm indeterminate. inate. D. Percentage-o Percentage-of-com f-completio pletion n method is is inappropriat inappropriate. e. (AICPA 1193 T- 6)
117. Hogan Farms produced 800,000 pounds of cotton during the 2010 season. Hogan sell sellss all all of its cott cotton on to Ott Ott Co., Co., which hich has has agre agreed ed to pur purchas chasee Hoga Hogan' n'ss enti entire re prod produc ucttion ion at the prevai vailing market price. Recent ent legis gislation assures that hat the mark arket pri price will not not fall below $.70 per pound during the next two years. Hogan's costs of selling and dist distri ribu buti ting ng the the cott cotton on are are imma immate teri rial al and and can can be reas reason onab ably ly esti estima mate ted. d. Hoga Hogan n repo report rtss its its inve invent ntor ory y at expe expect cted ed exi exit valu value. e. Dur During ing 2010 2010,, Hoga Hogan n sold old and and del deliver ivered ed to Ott Ott 600, 600,00 000 0 pounds at the market price of $.70. Hogan sold the remaining 200,000 pounds during 2011 at the market price of $.72. What amount of revenue should Hogan recognize in 2010? A. $420 $420,0 ,000 00 B. $432 $432,0 ,000 00 C. $560 $560,0 ,000 00 D. $576 $576,0 ,000 00 (Wegyandt & Warfield 13e) 118. Hartz Co., which began operations on January 1, 2010, appropriately uses the inst instal allm lmen entt sales ales metho ethod d of acco accoun unti ting ng.. Th Thee follo ollowi wing ng info inforrmati mation on per pertai tains to Hart Hartz' z'ss oper operat atio ions ns for for the the year year 2010 2010:: Inst Instal allm lmen entt sale saless $1,2 $1,200 00,0 ,000 00 Regu Regula larr sale saless 480, 480,00 000 0 Cost Cost of installment sales 720,000 Cost of regular sales 288,000 General and administrative expenses 96,000 Collections on installment sales 288,000. The deferred gross profit account in Hartz's December 31, 2010 balance sheet should be A. $115 $115,2 ,200 00.. B. $192 $192,0 ,000 00..
C. $364 $364,8 ,800 00.. D. $480 $480,0 ,000 00.. (Wegyandt & Warfield 13e)
119. On January 1, 2010, Orton Co. sold a used machine to King, Inc. for $350,000. On this date, the machine had a depreciated cost of $245,000. King paid $50,000 cash on January 1, 2010 and signed a $300,000 note bearing interest at 10%. The note was payable in three annual installments of $100,000 beginning January 1, 2011. Orton appr approp oprriate iately ly acco accoun unte ted d for the sale ale unde underr the the inst instal allm lmen entt metho ethod. d. King King made ade a timel imely y payment of the first installment on January 1, 2011 of $130,000, which included interest of $30,000 to date of payment. At December 31, 2011, Orton has deferred gross profit of A. $70, $70,00 000. 0. B. $66, $66,00 000. 0. C. $60, $60,00 000. 0. D. $51, $51,00 000. 0. (Wegyandt & Warfield 13e) 120. Dianne company sells gross on the installment plan uses the installment sales meth method od.. On june june 1, 20x1 20x1,, Diann iannee sold old a mach machin inee which hich cost cost P75, P75,00 000 0 to Ber Bert cor corpora porati tion on for P100,000. Bert corp, made two payments of P20,000 each during 19x1, before defaulting on the contract in 20x2. Dianne repossessed the machine which had a fair market value of P52,500 when Dianne reacquired it. The gain (loss) on repossession is: A. 7500 7500 los losss B. 7,50 7,500 0 gai gain n C. 17,5 17,500 00 loss loss D. 17,5 17,500 00 gain gain (CPAR Handout 2016) 121. 121. For For finan inanci cial al stat statem emen entt purp purpos oses es,, the the insta nstalllmen lmentt meth method od of acco accoun unti ting ng may may be use use if the A. Collection Collection period period extends extends over more more than 12 months. months. B. Installmen Installments ts are are due in differ different ent years. years. C. Ultimate Ultimate amount amount collect collectible ible is is indeterm indeterminate. inate. D. Percentage-o Percentage-of-com f-completio pletion n method is is inappropriat inappropriate. e. (AICPA 1191 T-6) 122.. 122
The metho method d most most commonl commonly y used to to report report defau defaults lts and and reposs repossess ession ionss is: A. Provide Provide no basis for the the repossessed repossessed asset asset thereby thereby recognizing recognizing a loss. loss.
B. Record the repossessed merchandise at fair value, recording a gain or loss if appropriate. C. Record the the repossessed repossessed merchandis merchandisee at book value, recordin recording g no gain or loss. D. None None of thes these. e. (K, W & W) 123. 123. Acco Accorrding ding to the ins install tallme ment nt meth method od of acco accoun untting, ing, gros grosss prof profit it on an insta nstalllmen lmentt sale ale is recognized in income A. On the the dat datee of sal sale. e. B. On the date date the final final cash cash collectio collection n is received. received. C. In propor proportio tion n to the cash cash collect collection ion.. D. After cash cash collections collections equal equal to the cost of sales sales have been received received.. (AICPA M0595 F-27) 124. During 2014, Vaughn Corporation sold merchandise costing $2,250,000 on an inst instal allm lmen entt basi basiss for for $3,0 $3,000 00,0 ,000 00.. Th Thee cash cash rece receip ipts ts rela relate ted d to thes thesee sale saless were were coll collec ecte ted d as foll follow ows: s: 2014 2014,, $1,2 $1,200 00,0 ,000 00;; 2015 2015,, $1,0 $1,050 50,0 ,000 00;; 2016 2016,, $750 $750,0 ,000 00.. What What is the the rate ate of gros grosss profit on the installment sales made by Vaughn Corporation during 2014? A. 75% B. 60% C. 40% D. 25% ( Bartleby Bartleby Review Questions) (Items 125-133, not aligned with the topic assigned) For Items #125-130, use the following information:
Season Seas onss Co Cons nsttru ruct ctiion is co cons nstr truc ucttin ing g an of offfic icee bu buiild ldin ing g un unde derr co cont ntrrac actt for Ca Cann nnon on Co Comp mpan any. y. The contract calls for progress billings and payments of $1,240,000 each quarter. The total contract price is $14,880,000 and Seasons estimates total costs of $14,200,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2014. 1. At Decem embe berr 31, 201 014 4, Seasons es esttimates that it is 30% co com mplet etee with the construction, based on costs incurred. 125. What is the total amount of Revenue from Long-Term Contracts recognized for 2014? A. $4,960,000 B. $4 $4,2 ,260 60,0 ,000 00 C. $4,464,000 D. $4,260,000
126. What is the balance in the Accounts Receivable account assuming Cannon Cafe has not yet made its last quarterly payment? A. $4 $4,9 ,960 60,0 ,000 00 B. $1 $1,2 ,240 40,0 ,000 00 C. $1 $1,2 ,240 40,0 ,000 00 D. $4 $4,9 ,960 60,0 ,000 00 127. At Decem embe berr 31, 201 015 5, Seas aso ons Con onsstruct ctiion estimat ates es that it is 75% complete with thee bu th buil ildi ding ng;; ho howe weve verr, th thee es esttim imat atee of tot otal al co cossts to be in incu currred ha hass ris isen en to $1 $14, 4,40 400, 0,00 000 0 duee to un du unan anttic iciipa pate ted d pr pric icee in incr crea easses es.. Wha hatt is the to tota tall am amou ount nt of Co Cons nstr truc ucttio ion n Ex Expe pens nses es that Seasons will recognize for the year ended December 31, 2015? A. $1 $10, 0,80 800, 0,00 000 0 B. $6 $6,3 ,300 00,0 ,000 00 C. $6 $6,3 ,390 90,0 ,000 00 D. $6 $6,5 ,540 40,0 ,000 00 128. At Decem embe berr 31, 201 015 5, Seas aso ons Con onsstruct ctiion estimat ates es that it is 75% complete with thee bu th buil ildi ding ng;; ho howe weve verr, th thee es esttim imat atee of tot otal al co cossts to be in incu currred ha hass ris isen en to $1 $14, 4,40 400, 0,00 000 0 duee to un du unan anti tici cipa pate ted d pr pric icee inc ncrrea easses es.. Wha hatt is rep epor orte ted d in th thee ba bala lanc ncee she heet et at De Dece cemb mber er 31, 2015 for Seasons as the difference between the Construction in Process and the Billings on Construction in Process accounts, and is it a debit or a credit? A. $3,380,000 Credit B. $1,240,000 Debit C. $8 $880 80,0 ,000 00 Debitt Debi D. $1,240,000 Credit 129. Seas aso ons Cons nsttruction com ompl pleetes the rem emaaini nin ng 25% of the bu buiilding cons nsttruction on December 31, 2016, as scheduled. At that time the total costs of construction are $15,000,000. What is the total amount of Revenue from Long-Term Contracts A. $14,880,000 B. $3,720,000 C. $3,720,000 D. $3,750,000 130. Construction Expe pen nses that Seas aso ons will reco cog gnize for the ye yeaar end ndeed Decem embe berr 31, 2016? A. $1 $15, 5,00 000, 0,00 000 0 B. $ 3,75 3,750, 0,00 000 0 C. $ 4,20 4,200, 0,00 000 0
D. $ 3,7 3,750 50,0 ,000 00 (Bartleby Review Questions)
131. 13 1.
132.. 132
133.. 133
The conver The converged ged sta standa ndard rd on rev revenu enuee recogn recognit itio ion n A. Reduces the the number of disclos disclosures ures required required for revenue revenue reportin reporting g B. Incre Increases ases the complex complexity ity of financia financiall statement statement preparati preparation on C. Recogni Recognizes zes and measures measures revenue revenue based on changes changes in assets assets and liabilitie liabilitiess D. Simpl Simplifies ifies revenue revenue recognition recognition practices practices across entities entities and industries industries (Dayag, 2015) 132. The firs firstt step step in the proc process ess for rev revenue enue rec recogni ognitio tion n is to to A. Det Determ ermine ine the trans transact action ion price price B. Ident Identify ify the the contract contract with the custome customerr C. Alloc Allocate ate the transacti transaction on price to the separate separate performa performance nce obligations obligations.. D. Ident Identify ify the separate separate performanc performancee obligations obligations in the contract contract (Dayag, 2015) The secon second d step step in the pro proces cesss for for revenu revenuee recogn recogniti ition on is is to A. Alloc Allocate ate transaction transaction price price to the separate performa performance nce of obligations obligations B. Det Determ ermine ine the the transac transactio tion n price price C. Ident Identify ify the contra contract ct with with custom customers ers D. Ident Identify ify the separate separate performanc performancee obligations obligations in the contract contract (Dayag, 2015)
For Items #134-139, use the following information:
Pamp Pampan anga ga Indu Indust stri rial al sell sellss mach machin iner ery y on the the inst instal allm lmen entt plan plan.. On Sept Septem embe berr 01, 01, 2015 2015,, Pamp Pampan anga ga ente ntered into an installment ent sale ale cont ontract with GMA Produc ductions ons for a six-y x-year ear per period. Equal annu annual al paym paymen ents ts unde underr the the inst nstallm allmen entt sal sale are are P187 P187,5 ,500 00 and and are are due due on Augu August st 31 of each each year year beginning in 2016. Additional information: ■ ■ ■
■
The cost of the machinery sold to GMA was P637,500 The implicit interest rate on the installment sales is 10% Pampanga industrial uses calendar year as a result of the above transaction and uses effective-interest rate method of amortizing any discount The present value factors at 10% for six period are as follows:
Year
1 2 3 4 5 6
PV of P1
.9091 .8264 .7513 .6830 .6209 .5645
PV of annuity of P1
.9091 1.7355 2.4869 3.1699 3.7908 4.3553
134. Assuming that circumstances are such that the collection of the installments due unde underr the the cont contra ract ct is reas reason onab ably ly assu assure red, d, comp comput utee the the real realiz ized ed gros grosss prof profit it on inst instal allm lmen entt for 2015 (rounded) A. 0 B. P81,250 250 C. P179 P179,1 ,119 19 D. 487, 487,50 500 0 135. 135.
Comp Comput utee the the tota totall inco income me for for 201 2015 5 (roun (rounde ded) d) A. P27, P27,22 221 1 B. P 108, 108,24 241 1 C. P 206, 206,34 340 0 D. P541 P541,7 ,721 21
136. Compute the total income for 2016 (rounded) (No Answer, Correct Answer: P 78,134) A. P7 P71, 1,22 221 1 B. P1 P108 08,7 ,741 41 C. P2 P206 06,3 ,340 40 D. P2 P257 57,4 ,433 33 137. Assuming that circumstances are such that the collection of the installments due und under the cont ontract cannot not be reasonably assured, com compute the realized zed gross profit on installment for 2015 (rounded) A. 0 B. P81,250 250 C. P179 P179,1 ,119 19 D. P487 P487,5 ,500 00
138. 138.
Comp Comput utee the the tota totall inco income me for for 201 2015 5 (roun (rounde ded) d) A. P2 P27, 7,22 221 1 B. P108 P108,4 ,471 71 C. P206 P206,3 ,340 40 D. P541 P541,7 ,721 21
139. 139.
Comp Comput utee the the tota totall inco income me for for 201 2016 6 (roun (rounde ded) d) A. A.P7 A.P78, 8,13 134 4 B. B.P1 B.P101 01,4 ,418 18 C. C. P102 P102,1 ,194 94 D. D.P1 D.P119 19,3 ,384 84 (Dayag, 2015)
140. Oro Company began operations on January 1, 2015 and appropriately uses the installment ent sales ales method of acc account unting. The following data ata are avail ailable for 201 2015 and and 2016:
Installment sales Gross profit on sale Cash collections from:2015 sales 2016 sales
2015 P1,500,000 30 % 500,000 -
2016 P1,800,000 40% 6 0 0 ,0 0 0 7 0 0 ,0 0 0
The realized gross profit for 2016 is: A. 720, 720,00 000 0 B. 520,000 000 C. 460,000 000 D. 280, 280,00 000 0 (Guerrero, 2015)
Part II: Long-term Construction Construction Contracts Contracts (141-280) 141. The theoret theoretical ical support support for for using using the percentage-of percentage-of-compl -completion etion method of accounti accounting ng for long term construction projects is that it A. Is more conservative conservative than the complet completed-con ed-contract tract method B. Reports Reports a lower net income income figure figure than the completed-c completed-contrac ontractt method C. More closely closely conforms conforms to the cost princi principle ple D. Produces Produces a more realistic realistic matching matching of expenses expenses with with revenues (Comprehensive Reviewer, Hilario Tan) 142. A company uses the percentage-of-completion method to account for a four year cons constr truc ucti tion on cont contra ract ct.. Prog Progre ress ss bill billin ings gs sent sent in the the seco second nd year year that that were were coll collec ecte ted d in the the third year would A. Be included included in the calculation calculation of the the income recognized recognized in the second second year B. Be included included in the calculat calculation ion of the the income recogniz recognized ed in the third third year C. Be included included in the calculat calculation ion of the the income recogniz recognized ed in the fourth fourth year D. Not be included included in the the calculation calculation of the income income recognized recognized in any year year (Comprehensive Reviewer, Hilario Tan) 143.
Cost of uncomplet uncompleted ed contracts contracts in excess excess of related related billings billings in in most most cases cases is is shown shown as A. Curren Currentt liabil liability ity B. Lo Long ng term term debt debt C. Curr Curren entt asse assets ts D. Inves Investm tmen ents ts (Comprehensive Reviewer, Hilario Tan)
144.
Billings Billings on on uncompleted uncompleted contracts contracts in excess excess of related related costs in most most cases cases is shown shown as as A. Curren Currentt liabil liability ity B. Lo Long ng term term debt debt C. Curr Curren entt asse assets ts D. Inves Investm tmen ents ts (Comprehensive Reviewer, Hilario Tan)
145. The construction-in-progress account accumulates the percentage-of-completion method is used A. Constr Construct uction ion cost costss to date date B. Constructi Construction on costs costs to date date less payments payments received received C. Constructi Construction on costs costs to date date less billings billings to date date D. Constructi Construction on costs plus plus gross gross profit profit earned earned to date
following when the
(Comprehensive Reviewer, Hilario Tan)
146. The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long term contracts is that it A. Is unaccept unacceptable able for income tax purpose purposess B. Gives results based upon estimates which may be subject to considerable uncertainty C. Is likely to assign a small amount of revenue to a period during which much revenue was actually earned D. None None of of the these se (Comprehensive Reviewer, Hilario Tan) 147. 147. In acco accoun unti ting ng for for long long term term cons constr truc ucti tion on cont contra ract ct usin using g the the perc percen enta tage ge-o -off-co comp mple leti tion on method, the gross profit recog cognized duri uring the first year ear woul ould be the estimated total gros grosss prof profiit from rom the the cont contra ract ct,, multi ultipl plie ied d by the per percent centag agee of the the cos costs incur ncurre red d duri during ng the year to the A. Total Total cost cost incu incurre rred d to date date B. To Tota tall estim estimat ated ed cost cost C. Unbilled Unbilled portion portion of the contract contract price price D. Total Total contrac contractt price price (Comprehensive Reviewer, Hilario Tan) 148. Bon Construction Company has consistently used the percentage-of-completion method of recognizing income. During 2015, Bon started work on a P3,000,000 cons constr truc ucti tion on cont contra ract ct whic which h was was comp comple lete ted d in 2012 2012.. Th Thee acco accoun unti ting ng reco record rdss prov provid ided ed the the following data: 2015 2016 Progress billings P1,100,000 P1,900,000 Costs incurred each year 900,000 1,800,000 Collections 700,000 2,300,000 Estimated cost to complete 1,800,000 How much income should Bon have recognized in 2016? A. 100, 100,00 000 0 B. 110,000 000 C. 150,000 000 D. 200, 200,00 000 0 (Dayag, 2016)
149. Ube Construction Company has consistently used the percentage-of-completion meth method od.. On janu januar ary y 10,2 10,201 015, 5, Ube Ube bega began n work work on a P6,0 P6,000 00,0 ,000 00 cons constr truc ucti tion on cont contra ract cts. s. At the the ince incept ptio ion n date date,, the the esti estima mate ted d cost cost of cons constr truc ucti tion on was was P4,5 P4,500 00,0 ,000 00.. Th Thee foll follow owin ing g data data relate to the progress of the contract: Income recognized at 12/31/2015 Cost incurr urred 1/10/2015 thr thro ough 12/31/2016 Estimated cost sto complete at 12/31/2016
P600,000 3,600 600,000 1,200,000
How much income should Ube recognized for the year ended December 31,2016? A. P300 P300,0 ,000 00 B. 525,00 ,000 C. 600,00 ,000 D. 900, 900,00 000 0 (Dayag, 2016) 150. Lovely ely Co. recogni gnizes zes revenu enue and expense nses using the perc ercenta ntagege-ofof-completion meth method od.. Dur During ing 2015 2015,, a singl inglee long long-t -ter erm m proj projec ectt was was begu begun, n, whi which cont contin inue ued d throu hrough gh 2016. Information on the project follows: 2015 2016 Accounts nts recei ceivable from cons onstructi ction con contract P100,0 0,000 P30 P300,000 Construction expenses 105,000 192,000 Construction in progress 122,000 364,000 Partial billings on contract 100,000 420,000 Profit recognized from the long term construction contract in 2016 should be A. P 50,0 50,000 00 B. 108,00 ,000 C. 128,00 ,000 D. 228, 228,00 000 0 (Dayag, 2016) 151.. 151
Contra Contract ct revenu revenuee in in const construc ructio tion n contr contract act compri comprise se A. The initial initial amount amount of revenue revenue agreed agreed in the contract contract only only B. Variation Variation in contract contract work, work, claims claims and incentive incentive payment payment only only C. The initial amount of reve evenue agre greed in the con contract, ct, variati ation in con contract work, claim and incentive payment D. The initial initial amount amount of revenue agreed agreed in the contract contract and progress progress billings billings (Punzalan, 2018)
152. The percentage of completion of a construction contract is based on all of the following, except A. Th Thee prop propor orttion ion that hat cont contra ract ct cos costs incur ncurrred for wor work perf perfor orm med to date date bear bear to the estimated total contract costs B. Survey Survey of work work perfor performed med C. Completion Completion of a physical physical proporti proportion on of the the contract contract work work D. Progress Progress payments payments and advances advances received received from from customers customers (Punzalan, 2018) 153. The calculation of the income recognized in the third year of a 5-year construction contract accounted for using the percentage of completion method includes the ratio of A. Total costs costs incurred incurred to to date to total total estimate estimated d costs B. Total costs incurred incurred to date date to total total billing billingss to date date C. Costs incurred incurred in year year 3 to total total estimat estimated ed costs costs D. Costs incurred incurred in year year 3 to total total billin billings gs to date date (Punzalan, 2018) 154. In accounting for a long-term construction contract using the percentage of completion method, the progress billings on contract account is A. Contra Contra curre current nt asset asset accoun accountt B. Contra Contra non-c non-curr urrent ent asset asset accou account nt C. Noncur Noncurren rentt liabil liability ity accoun accountt D. Reve Revenue nue accou account nt (Punzalan, 2018) 155.
Which of the the followi following ng is included included in the cost cost of of fulfill fulfilling ing a constructi construction on contract? contract? A. Cost of of hiring hiring equipment equipment used used in the the constructi construction on B. General administration costs for which reimbursement is not specified in the contract C. Sell Sellin ing g costs costs D. Depreciatio Depreciation n of idle plant and and equipment equipment that is not used used on a particular particular contract contract (Milan, 2017)
The following data relate to a construction job started by Jay Company during 2016: Total contract price P100,000 Actual costs during 2016 20,000 Estimated remaining costs 40,000 Billed to customer during 2016 30,000 Received from customer during 2016 20,000
156. Any costs incurr urred are exp expected to be recov coverable. Under the cost ost recov covery method,cons constr truc ucti tion on acco accoun unti ting ng((zer zero-pr o-prof ofit it), ), what what amou amount nt shoul hould d Jay Comp Compan any y reco recogn gniize as gross profit for 2016? A. 0 B. 4,000 C. 10,000 D. 12,000 (Dayag, 2015) 157. X Company uses the percentage of completion method of recognizing income. In 201 2015, work was started on a P18,00 ,000,000 000 job com ompl plet eteed in 2017. Recor cords in 2016 show how the following: Progress billing P6,600,000 Costs incurred 5,400,000 Collections 4,200,000 Cost to complete 10,800,000 Gross profit recognized in 2016 was: A. 1,40 1,400, 0,00 000 0 B. 1,20 1,200, 0,00 000 0 C. 900,000 000 D. 600, 600,00 000 0 (Guerrero, 2016) For Items #158-160, use the following information:
In 2013, South Builders agreed to construct a commercial building at a price of P1,000,000. Sout South h Bui Builder lderss uses uses the per percent centag agee of comp comple leti tion on meth method od of recog ecogni nizi zing ng reven evenue ue on long long ter term construction projects. The data relating to the projects from 2014 to 2016 are as follows:
Cost incurred each year Estimated cost to complete Billings to date Collections of billings to date 158.. 158
2014
2015
2016
P280,000 520,000 150,000 120,000
P320,000 200,000 400,000 320,000
P185,000 1,000,000 940,000
What What is the amount amount of gros grosss profi profitt to be recog recogniz nized ed in in 2015? 2015? A. 80,000 B. 78,500
C. 85,000 D. 90,000 159. What is the balance of construction in progress net of contract billings account of South Builders’ on December 31, 2015? A. 350, 350,00 000 0 B. 300,000 000 C. 550,000 000 D. 380, 380,00 000 0 160. Assuming the company any uses the zer zero profit of recog cognizing reven venue from the pro project, what is the balan alancce of the const nstruction in Progress acc account net of contr ntract billings as of December 31, 2015? A. 200, 200,00 000 0 B. 250,000 000 C. 350,000 000 D. 300, 300,00 000 0 (Guerrero, 2016) For Items #161-163, use the following information:
On Janua anuary ry 1, 2018 2018,, Hard Hardrrock ock Comp Compan any y star tarted ted the the cons consttruct ructiion of a buil buildi ding ng at a fixe fixed d cont contra ract ct price of P1,000,000. On the same date, the customer paid a mobilization fee equal to 5% of cont contra ract ct pric pricee that that will will be dedu deduct ctib ible le from from the the firs firstt bill billin ing. g. Th Thee outc outcom omee of cons constr truc ucti tion on cont contra ract ct cannot be estimated reliably Duri During ng 2018 2018,, the the enti entity ty bill billed ed the the cust custom omer er equi equiva vale lent nt to 30% 30% of the the cont contra ract ct pric price. e. Duri During ng 2019 2019,, the ent entity billed aga again the cust ustomer amounting to 20% of the cont ontract price. ce. Duri uring 2020, the ent entity ity bill billed ed agai again n the cus custom omer er amou amount ntiing to 40% 40% of the the cont contra ract ct pric price. e. Th Thee remai emaini ning ng bil billing ling was made at the year of completion of the project. The enti ntity made col collection from the custom omer er at the end of 201 2018, 2019 and and 202 2020, in the amou amoun nt of P120, 20,000, P450,0 0,000 and P180,00 ,000, respectivel vely. The entity pro provided the following data ata concerning the direct costs related to the said project: 2018
Cumulative costs incurred at year-end 360,000 Remaining es estimated co costs to co complete at at year-end 840,000 161.. 161
2019
2020
800,000 250,000
870,000 50,000
What What is the realiz realized ed gross gross profit profit for the year year ended ended Decemb December er 31, 31, 2019? 2019?
A. B. C. D.
50,000 000 200,000 000 150,000 000 0
162. What is the excess of construction in progress over progress billings or excess of progress billings over construction in progress on December 31, 2020? A. 30,000 30,000 excess excess billin billings gs B. 80,000 80,000 excess excess billin billings gs C. 20,000 excess construction construction in progres progresss D. 50,000 excess construction construction in progres progresss 163.. 163
What What is the the balan balance ce of accou accounts nts receiv receivabl ablee on Decemb December er 31, 31, 2020? 2020? A. 150, 150,00 000 0 B. 100,000 000 C. 120,000 000 D. 50,000 (CPAR Reviewer, 2017)
164. When the outcome of a construction contract can be estimated reliably, what accounting method shall be used by the long-term contractor for the recognition of construction revenue and construction cost? A. Percen Percentag tagee of completi completion on method method B. Cost Cost reco recover very y metho method d C. Zero Zero-p -pro rofi fitt method method D. Instal Installme lment nt method method (CPAR Reviewer, 2017) 165. When it is probable that total contract costs will exceed total contract revenue, how should contractor account for the difference? A. The expected expected loss shall be recogniz recognized ed as an expense expense immediatel immediately. y. B. The expected expected profit profit shall shall be recognized recognized as a profit profit immedia immediately. tely. C. The expected loss shall be recognized as an expense taking into account the percentage of completion as of the end of the period. D. The expected loss shall be recognized as a profit taking into account the percentage of completion as of the end of the period. (CPAR Reviewer, 2017)
166. If the sale transaction provides for peri eriodic installments over an extended ded period of time time and and the the coll collec ecti tibi bili lity ty of the the sale saless pric pricee cann cannot ot be reas reason onab ably ly esti estima mate ted, d, what what meth method od of revenue recognition is the most appropriate? A. Cost Cost recov recovery ery method method B. Accr Accrua uall basi basiss C. Inst Instal allm lment ent meth method od D. Cash Cash basi basiss (CPAR Reviewer, 2017) 167.. 167
Under Under instal installme lment nt method method of revenu revenuee recogni recognitio tion, n, which which statem statement ent is true? true? A. Both sales sales revenue revenue and cost of goods sold sold are recognized recognized at the point point of sale. B. Th Thee relat elated ed gros grosss prof profiit of the the inst instal alllment mentss sales ales is defe deferr rred ed to thos thosee per period iod dur during ing which cash will be collected. C. As receivables are collected, a portion of the deferred gross profit equal to the gross profit rate times cash collected is recognized as income. D. All of these these statement statement are true. (CPAR Reviewer, 2017)
168.
In instal installment lment sales, sales, how how should should the deferred deferred gross gross profit profit account account be present presented? ed? A. Asset valuati valuation on allowance allowance or contract-r contract-receivab eceivable le account B. Unearn Unearned ed revenue revenue account account C. Eq Equi uity ty accou account nt D. Incom Incomee accou account nt (CPAR Reviewer, 2017)
169.
Under the gross profit profit realiza realization tion method, method, first first collections collections are regarded regarded as A. Ex Expe pens nses es B. Gros Grosss pro profi fitt C. Cost Cost rec recov over ery y D. Return Return of invest investment ment (Guerrero, 2013)
170. Under the installment method, the difference between selling price and the cost of sale is recorded as: A. Deferr Deferred ed Gross Gross Profit Profit B. Income C. Asset D. Ex Expe pens nsee (Guerrero, 2013)
(Items #171-174, 178-180 not aligned with the topic) 171. Direct costs of franchise incurred by a franchisor that are within the scope of PFRS 15 are recognized as expense during the A. immed immediate iate recogni recognition tion princi principle ple B. eff effect ective ive int intere erest st meth method od C. con concept cept of conse conserva rvativ tivee or prudence prudence D. ma matc tchi hing ng conce concept pt (Advance Accounting and Reporting I, Millan 2016) 172. 17 2. If a fr fran anch chis isee co cont ntra ract ct req equi uire ress th thee fra ranc nchi hissor to un unde derrta take ke ac acti tivi viti ties es th that at wo woul uld d af afffec ectt thee fr th fran anch chis isor or’s ’s in inte tell llec ectu tual al pr prop oper erty ty to wh whic ich h th thee fr fran anch chis isee ee ha hass ri righ ghts ts,, th thee pe perf rfor orma manc ncee obligation is satisfied A. at a pin pintt in in tim timee B. ov over er tim imee C. un unde derr ti time D. al alll the the ti time me (Advance Accounting and Reporting I, Millan 2016) 173. PFRS 15 requires how many steps in recognizing revenue from contracts with customers? A. 2 B. 3 C. 4 D. 5 (Advance Accounting and Reporting I, Millan 2016) 174. 17 4. Re Reve venu nuee from the fra ranc nchi hisse co cont ntra ract ctss sh shal alll be rec ecog ogni nize zed d in ac acco corrda danc ncee wi witth wh whiich of the following reporting standards? A. PA PAS S 18, 18, Par Partt B B. PFRS 15 15 C. FA FAS S No. No. 45 (U (US S GAAP GAAP)) D. Al Alll of of the the abo above ve (Advance Accounting and Reporting I, Millan 2016 )
175.. 175
Accord According ing to PFRS PFRS 15, a good good or or serv service ice is distin distinct ct if? if? A. the entity entity regularly regularly sells sells the good good or service service separatel separately y
B.
the customer can benefit from it, either on its own or together with other resources that are readily available to the customer C. none none of the the abo above ve D. A and B (Advance Accounting and Reporting I, Millan 2016) 176. 176.
Unde Underr PFRS PFRS 15 15 reve revenu nuee is mea measu sure red d A. at the fair value value of the considerat consideration ion received received or receivable receivable in the contract contract B. at the amount of transaction price allocated to a performance obligation that is Satisfied C. at the stand-alon stand-alonee selling selling price of the promised promised good good service service in the contract contract D. any any of of the these se (Advance Accounting and Reporting I, Millan 2016)
177.. 177
The prim primary ary issu issuee in accoun accountin ting g for constr construct uction ion cont contrac racts ts is is A. the the allo alloca cati tion on of cont contra ract ct reve revenu nuee to the the acco accoun unti ting ng peri period odss in whic which h cons constr truc ucti tion on work is performed B. the all allocati ation of contract act costs to the accoun ounting periods ods in which construction work is performed C. the determi determination nation of the percentage percentage of completion completion D. A and B (Advanced Financial Accounting Part 1 2015 By Z. Millan)
178. Rapha haeel Company paid 20 20,,000, 0,0 000 for the net assets of Paris Cor orp poration an and d Paris was then dissolved. Paris had no liabilities. The fair values of Paris’ assets was P2,5 P2 ,500 00,0 ,000 00.. Pa Parris is’’ on only ly no nonn-cu currre rent nt as assset etss wer eree lan and d an and d eq equi uipm pmen entt wi witth fai airr va vallue uess of P160,000 and P640,000. At what value will the equipment be recorded by Raphael? A. 64 640, 0,00 000 0 B. 400,00 000 0 C. 240,00 000 0 D. 0 (Advanced Accounting Part 1, 2012 ed. By Baysa/Lupisan) 179. Park Compan any y ac acq quired a 90% interest in Southwester ern n Company on Dec eceember 31 31,, 2014 for P320,000. During 2015, Southwestern had net income of P22,000 and paid a cash dividend of P7,000. Applying the cost method would give a debit balance in the Investment in Stock of Southwestern Company account at the end of 2015 of: A. 33 335, 5,00 000 0 B. 333,50 500 0
C. 313,70 700 0 D. 32 320, 0,00 000 0 (Advanced Accounting Part 1, 2012 ed. By Baysa/Lupisan)
180. Whi hich ch of the fol olllowing items will no nott affect the acqui uissition ye yeaar’s cons nso olida datted net income in a business combination? A. Sto Stock ck iss issuan uance ce cos costt B. Direc Directt cost cost of busine business ss combin combination ation C. Gai Gain n or bar bargai gain n purch purchase ase D. Am Amor orti tiza zattio ion n of di difffe fere renc ncee be betw twee een n fa fair ir va valu luee an and d ca carrry ryiing am amou ount nt of ne nett as assset etss of acquire (CPAR Special Handouts 2017) (Items #181-190, not aligned with the topic assigned) 181.
The instal installment lment method of recogniz recognizing ing profit profit for account accounting ing purpose purposess is accepta acceptable ble if if A. Colle Collections ctions in in the year of sale do not exceed exceed 30% of the total total sales price. price. B. An unreali unrealized zed profit profit account is credit credited. ed. C. Colle Collection ction of the the sales price is not reasonably reasonably assured. assured. D. The method method is consistentl consistently y used for all sales sales of similar similar merchandis merchandise. e. (Punzalan 2016)
182. 18 2.
Under th Under thee ins insta tall llme ment nt sa sale less met metho hod, d, A. Re Reve venu nue, e, co cost sts, s, an and d gr gros osss pr prof ofit it ar aree rec ecog ogni nize zed d pr prop opor orti tion onat atel ely y to th thee ca cassh th that at is received from the sale of the product. B. Gross profit is deferred proportionately to cash uncollected from sale of the product, but total revenue and costs are recognized at the point of sale. C. Gross prof ofiit is no nott rec eco ogni nizzed until the amount of cas ash h rec eceeived exce ceeeds the cos ostt of the item sold. D. Re Reve venu nues es an and d co cossts ar aree rec ecog ogni nize zed d pr prop opor orttio iona nattel ely y to th thee ca cash sh rec ecei eive ved d fro rom m th thee sale of the product, but gross profit is deferred until all cash c ash is received. (Punzalan 2016)
183.. 183
Under the Under the cost cost rec recove overy ry meth method od of of reven revenue ue reco recogni gnitio tion, n, A. Income is recogniz recognized ed on a proportionate proportionate basis basis as cash is received received on the product product B. Income is recognized when the cash received from the sale of the product is greater than the cost of the cost co st C. Income is recognized recognized immedi immediately ately sale sale of the the product. product. D. No None ne of th thes ese. e. (Punzalan 2016)
184. 18 4. Ch Chri riss Co Co.. se sellls eq equi uipm pmen entt on in inst stal allm lmen entt co cont ntrrac actts. Whi hich ch of the fol olllow owiing sta tattem emen ents ts best justifies Chris, use of the cost recovery method of revenue recognition to account for these installment sales? A. The sales contract provides that title to the equipment passes to the buyer only when all payments have been made. B. No cash payment paymentss are due due until one year from the the date of of sale. sale. C. Sales are subject subject to a high high rate rate of return return.. D. There is no reasonabl reasonablee basis for estimat estimating ing collectabil collectability ity (Punzalan 2016) 185.. 185
Which of the Which the followi following ng are recog recogniz nized ed each peri period od under under the cost cost recov recovery ery metho method? d? A. Co Cost stss on only ly B. Re Reve venu nues es onl only y C. Bot Both h costs costs and rev revenue enuess D. No None ne of of the these se (Punzalan 2016)
186. Leop opaard Co. uses the ins nsttallment sales method to recogn gniize reve ven nue. Custom omer erss pay thee in th inssta tall llme ment nt no note tess in 24 eq equa uall mon ontthl hly y am amou ount nts, s, wh whic ich h in incl clud udee 12 12% % int nter eres estt. Wha hatt is the balance of an installment note receivable 6 months after the sale? A. 75% of the the origin original al sales sales price. price. B. Less than 75% 75% of the original original sales price C. The value of of the remaining remaining monthly monthly payments payments discou discounted nted at 12% D. Less than than the present present value of the remaining remaining monthly monthly pay discount discounted ed at 12%. (Punzalan 2016) 187. On January 2, 2016, Colt Co. sold land that cost P600,000 for P800,000, receiving a note bearing interest at 10%. The note will be paid in three annual installments of P321,700 starting on December 31, 2016. Because collection of the note is very uncertain, Colt will use the cost recovery method. How much revenue from this sale should Colt recognize in 2016? A. 0 B. 6,000 C. 8,000 D. 20,000 (Punzalan 2016)
188. The following information pertains to a sale of on December 31, 2016: Carrying amount Sales price: Cash Purc Pu rcha hase se mo mone ney y mo mort rtga gage ge
real estate by South Co, to Nord. Co. 4,000,000 600,000 5,40 5, 400, 0,00 000 0
The mo The morrtg tgag agee is pa paya yabl blee in ni nine ne an annu nual al ins nsttal allm lmen ents ts of P6 P600 00,0 ,000 00 be begi ginn nnin ing g Dec ecem embe ber r 31, 2017, plus interest of 10%. The December 31, 2017 installment was paid as sched edu uled, tog ogeether with inter ereest of P5 P54 40,00 000 0. Sou outth uses the co cosst rec eco over ery y met eth hod to acccoun ac untt for the sal alee. What am amou oun nt of inco com me sho hou uld South reco cog gnize in 20 201 17 from the real estate sale and its financing? A. 1, 1,14 140, 0,00 000 0 B. 740,00 000 0 C. 540,00 000 0 D. 0 (Punzalan 2016) 189.. 189
The books books of of Paiyak Paiyakan an Company Company show show the the ff. ff. balance balancess on Decemb December er 31, 31, 2016: 2016: Accounts receivable 313,750 Deferred gross profit (before adjustment) 38 , 00 0 Sales 2016 10,000 2017 15,000 Cost of sales 2016 8,000 2017 9,000 Cash collections: 20 16 20 17 On 2016 sales 7,000 3,000 On 2017 sales 12,000
If the cost recove verry method is used ed,, wha hatt amoun untt would Pitt report as gross profit from sales to these customers for the year ended March 31, 2017? A. 2,000 B. 3,000 C. 5,000 D. 15,000 (Punzalan 2016)
190. On January 1, 2016, Rex Co. sold a used machine to Lake, Inc. for P525,000. On this date da te,, th thee ma mach chin inee ha had d a de depr prec ecia iate ted d co cost st of P3 P367 67,5 ,500 00.. La Lake ke pa paid id P7 P75, 5,00 000 0 ca cash sh on Ja Janu nuar ary y 1, 2016 and signed a P45 0,000 note bearing interest at 10%. The note was payable in three an ann nual installment ntss of P150, 0,0 000 beginning Janua uarry 1, 2017. Rex ap app propriately acco ac coun untted fo forr th thee sal alee un unde derr th thee ins nsttal allm lmen entt me meth thod od La Lake ke ma made de a ti time mely ly pa paym ymen entt of fi firs rstt inst in stal allm lmen entt on Ja Janu nuar ary y 1, 20 2017 17 of P1 P195 95,0 ,000 00,, wh whic ich h in incl clud uded ed in inte tere rest st of P4 P45, 5,00 000 0 to da date te of payment. At December 31, 2017, Rex had deferred gross profit of A. 10 105, 5,00 000 0 B. 90,000 C. 99,000 D. 76,500 (Punzalan 2016) 191. Builder ders Construction Corp. signed a con contract to bui build a five-level vel apart artment over ver a period of two years, and with this contract also signed a maintenance contract for five yea years. Both con contracts cts are negot gotiable as a single packa ckage and are closely related to each other. The two contracts should be A. Combined Combined and treated treated as a single single contract contract B. Segmented Segmented and consid considered ered as two separate separate contracts contracts C. Recognized Recognized under under the the completed completed contract contract method method D. Treate ated dif differently. The building under der the completed cont ontract method and the maintenance contract under the percentage of completion method (Punzalan, 2016) 192. The measurement of contract revenue is affected by a variety of uncertainties that depend on the outcome of future events. Which statement is incorrect? A. Contractor and a customer may agree on variations and claims that increase or decrease contract revenue subsequently B. The amount of reve evenue agreed in a fixed price contract act may incr ncreas ease as a result of cost escalation clause C. The amou amoun nt of revenu enue may increase as a resu esult of pen penalties ari arising from dela elays caused by the contractor in the completion of the contract D. When a fixed price contract involves a fixed price per unit of output, contract revenue increases as the number of units is increased. (Punzalan, 2016) 193. A company used the percentage of completion method of accounting for a 4-year construction contract. Which of the following items should be used to calculate the income recognized in the second year?
Inco Income me prev previo ious usly ly reco recogn gniz ized ed
A. B. C. D.
Coll Collec ecti tion on on prog progre ress ss bill billin ings gs
Yes No Y es No
Y es Yes No No (Punzalan, 2016)
194. A company used the percentage of completion method of accounting for a 4-year construction contract. Which of the following items should be used to calculate the income recognized in the First year? Progress Billings Collection on progress billings A. Yes Y es B. Y es No C. No No D. No Yes (Punzalan 2016) 195. In accounting for a long-term construction contract using the percentage of completion method, the progress billings on contract account is A. Contra Contra curre current nt asset asset accoun accountt B. Contra Contra non-c non-curr urrent ent asset asset accou account nt C. Noncur Noncurren rentt liabil liability ity accoun accountt D. Reve Revenue nue accou account nt (Punzalan 2016) 196. High Rise Corp. has entered into a very profitable fixed-price contract for cons constr truc ucti ting ng a cond condom omin iniium buil buildi ding ng over over a per period iod of thr three year years, s, wit with tot total est estimat imated ed cos cost of P18M P18M.. It incu incurrs the the follo ollowi wing ng cost costss relat elatiing to the cont contra ract ct duri during ng the first irst year year of construction: Materials
P 2.5M
Site Labor costs
2.0M
Agreed administration costs as per contracts to be reimbursed by the customer
1.0M
Depreciation of the plant used for the construction
500K
Marketing costs for selling condo units when they are ready for occupancy
1.0M
A. B. C. D.
33 ⅓% 27% 25% 39% (Punzalan 2016)
197. The followi following ng data data pertai pertains ns to to Pell Pell Co.’s Co.’s construction construction Jobs, which commenced commenced during during 2016: PROJECT 1
PROJECT 2
P 4 2 0 ,0 0 0
P 3 0 0 ,0 0 0
Cost incurred during 2016
240,000
280,000
Estimated cost to complete
120,000
40,000
Billed to customers during 2016
150,000
270,000
90,000
250,000
Contract price
received from customers during 2016
If Pell used the percentage of o f completion method, what amount of gross profit (loss) would Pell report in it’s 2016 income statement? A. (20,0 20,000 00)) B. 20,000 C. 22,500 D. 40,000 (Punzalan 2016) For Items #198-200, use the following information:
Atla Atlass Const Constru ruct ctio ion n Co. Co. Has Has used used the the costcost-to to-c -cos ostt perc percent entage age meth method od of reco recogni gnizi zing ng reven revenue. ue. Th Thee following incomplete records we’re provided for a recently completed building project
198. 198.
How How muc much h cos costt was was incu incurr rred ed in 201 2016? 6? A. 18,4 18,400 00,0 ,000 00 B. 11,8 11,800 00,0 ,000 00 C. 6,60 6,600, 0,00 000 0 D. 1,60 1,600, 0,00 000 0
199.. 199
What What percen percentag tagee (round (rounded) ed) ofthe ofthe proj project ect was was compl complete eted d by the the end of 2016? 2016? A. 55% B. 60% C. 65% D. 70%
200.. 200
What What is the the estim estimated ated cost cost to comp complet letee the proj project ect at at the the end of of 2016 2016 A. 3,06 3,060, 0,00 000 0 B. 6,80 6,800, 0,00 000 0 C. 8,20 8,200, 0,00 000 0 D. 9,80 9,800, 0,00 000 0
201. Deb Co. records all sales using the installment method of accounting. Installment sales con contracts cts call for 36 equ equal monthly cash ash pay payments. The amount of deferred gross profit relating to collections 12 months beyond the balance sheet date should be reported in the A. Current Current liabilit liability y section section as a deferre deferred d revenue. revenue. B. Noncurrent Noncurrent liabil liability ity section section as a deferred deferred revenue. revenue. C. Current Current asset asset section section as a contra contra account. account. D. Noncurrent Noncurrent asset asset section section as as a contra contra account. account. (AICPA, Adapted) 202.. 202
The Hogbe Hogbean an Co. is a const construc ructio tion n company company that that has the the ff. ff. costs costs on its cont contrac racts: ts: 1. Proj Project ect mana manager ger’s ’s cos costs ts 2. Destru Destructi ction on of an exist existing ing buil buildin ding g 3. Restor Restorati ation on of an old factor factory y According to AIS 11 (Construction Contracts) which costs may be included within contract costs? A. Cost Cost (1) and cost cost (2) (2) only only B. Cost Cost (1) (1) and and cost cost (3) (3) only only C. Cost Cost (2) (2) and and cost cost (3) (3) only only D. Cost Cost (1), (1), (2) and (3) (Punzalan, 2015)
203. According to AIS 11, Construction Contracts, which of the following projects undertaken by an entity should be accounted for as a construction contract? A. An item of plant plant and machinery machinery being construc constructed ted to be sold as inventory inventory.. B. An office office block being being construct constructed ed as investment investment propert property. y.
C. A warehouse warehouse being being construct constructed ed for the entity’s entity’s own own use. D. A large boat being constructed for a third party under a specifically negotiated contract. (Punzalan, 2015) 204. 204. In acco accoun unti ting ng for longong-te term rm cons consttruct ructiion cont contra ract ct suing uing the the perc percen enta tage ge of comp complletio etion n method, the progress billings on contra account is a A. contra contra curre current nt asset asset account account.. B. contra contra non-cu non-curre rrent nt asset asset account account.. C. non noncur curren rentt liabili liability ty account account.. D. reven revenue ue acc accoun ount. t. (Punzalan, 2015) 205. The calc alculat ulatiion of the incom come recog cognized in the third year of a five-y e-year ear con construction contract accounted for using the percentage-of-completion method includes the ratio of A. Total costs costs incurred incurred to to date to total total estimate estimated d costs. costs. B. Total costs incurred incurred to date date to total total billing billingss to date. date. C. Costs incurred incurred in year year 3 to total total estimat estimated ed costs. costs. D. Costs incurred incurred in year 3 to to total billin billings gs to date. date. (Punzalan, 2015) (Items #206-208, not aligned with the topic assigned) 206. Roco Corp., which began business on January 1, 2008, appropriately uses the inst in stal allm lmen entt sa sale less me meth thod od of ac acco coun unti ting ng fo forr in inco come me ta tax x re repo port rtin ing g pu purp rpos oses es.. Th Thee fo foll llow owin ing g data are available for 2008: Installment accounts receivable, 12/31/08 P200,000 Installment sales for 2008 P350,000 Gross profit on sales 40% Under the installment sales method, what would Roco’s deferred gross profit at December 31, 2008? A. P2 P20, 0,00 000 0 B. P90,00 000 0 C. P80,00 000 0 D. P6 P60, 0,00 000 0 (Punzalan, 2015) 207. Long Co., which began operations on January 1, 2008, appropriately uses the inst in stal allm lmen entt sal ales es met etho hod d of ac acco coun unti ting ng.. Th Thee fol ollo lowi wing ng in info forrma mati tion on pe perrta taiins to Lo Long ng’’s operations for the year 2008:
Installment sales Regular sales Cost of installment sales Cost of regular sales General and administrative expenses Collections on installment sales What is the net income on December 31, 2008? A. P4 P400 00,0 ,000 00 B. P2 P200 00,0 ,000 00 C. P3 P300 00,0 ,000 00 D. P1 P100 00,0 ,000 00
P1,000,000 600,000 500,000 300,000 100,000 200,000
(Punzalan, 2015)
208. A refrigerator was sold to Fernanda Castro for P16, 000, which included a 40% markup on selling price. She made a down payment of 20%, payment of four of the remaining 16 equal paym ymen entt and de deffau aullted on further payments. The ref efrriger eraator was repo re possses esssed ed,, at wh whic ich h tim imee the fa fair ir va valu luee wa wass de dete term rmin ined ed to be P6 P6,8 ,800 00.. Th Thee rep epos osse sesssi sion on resulted to the following (loss) gain: A. P( P(1, 1,04 040) 0) B. P1,040 C. P4,056 D. P2,960 (Punzalan, 2015) 209. 209. Hans Hansen en Cons Constr truc ucti tion on,, Inc, Inc, has has cons consis iste tent ntly ly used used the the perc percen enta tage ge-o -off-co comp mple leti tion on meth method od of reco recogn gniizing zing incom ncome. e. Duri During ng 2008 2008,, Hans Hansen en star tarted ted work work on a P3,0 P3,000 00,0 ,000 00 fixed ixed--pri price cons constr truc ucti tion on cont contrract act. Th Thee acco accoun untting ing recor ecords ds dis disclos closed ed the the foll follow owin ing g dat data for the the year year ended December 31, 2008: Costs incurred P930,000 Estimated cost to complete 2,170,000 Progress billings 1,100,000 Collections 700,000 How much loss should Hansen have recognized in 2008? A. P230 P230,0 ,000 00 B. P100 P100,0 ,000 00 C. P30,000 000 D. P0 (Punzalan, 2015)
210. 210. Th Thee Robe Roberrt Cons Consttruct ructiion Corp Corpor orat atio ion n uses uses the the per percent centag agee-of of-c -com ompl plet etiion met method hod of acco accoun untting. ing. In 2008 2008,, Robe Roberrt bega began n to wor work on a cont contrract act it had had recei eceive ved d whic which h prov provid ided ed a contract price of P8,000,000. Other details follow: Costs incurred during the year P1,200,000 Estimated cost to complete as of December 31 4,800,000 Billings during the year 1,440,000 Collections during the year 1,000,000 What should be the gross profit recognized in 2008? A. P160 P160,0 ,000 00 B. P240 P240,0 ,000 00 C. P400 P400,0 ,000 00 D. P1,6 P1,600 00,0 ,000 00 (Punzalan, 2015) 211. According According to to IAS 11, which which of of the the followin following g projects projects undertaken undertaken by by an entity entity should should be accounted for as a construction contract? A. An item of plant plant and machinery machinery being construc constructed ted to be sold as inventory inventory B. An office office block being being construct constructed ed as an investment investment property property C. A warehouse warehouse being being construct constructed ed for the entity’s entity’s own own use D. A large boat being construct constructed ed for a third party under a specifical specifically ly negotiated negotiated contract (Punzalan, 2016) 212. How should should the balances balances of progress progress billings billings and and construc construction tion in progress progress be shown shown at reporting dates prior to the completion of o f a long-term contract? A. Progress Progress billings billings as deferred income, income, construction construction in progress progress as deferred expense B. Progress Progress billings billings as income, income, constructi construction on in progress progress as inventory inventory C. Net, as current current asset asset if debit balance balance and current current liability liability if credit credit balance balance D. Net, as income income from from construction construction if if credit credit balance, balance, and loss from construc construction tion is debit balance (Punzalan, 2016) 213.
The percenta percentage ge of completion completion of a construct construction ion contrac contractt is based of the the ff. ff. except: except: A. The proportion proportion that contract contract costs costs incurred incurred for work performed performed to date bear to the estimated total contract costs B. Survey Survey of work work perfor performed med C. Completion Completion of a physical physical proporti proportion on of the the contract contract work work D. Progress Progress payments payments and advances advances received received from from customers customers
(Punzalan, 2016) For Items #214-217, use the following information:
Sin Construction Co. has used the cost-to-cost percentage-of-completion method of recognizing revenue, Marc Sin assumed the presidency of the company after the death of his father, Vincent. In reviewing the records, Marc finds the following information regarding a recently completed building project for which the total contract was P2,000,000
Gross profit (loss) Cost incurred each year
2011
2012
2013
P40,000 360,000
P140,000 ?
P(20,000) 820,000
Marc wants to know how effectively the company operated during the three (3) years on this project and, since the information is not complete, has asked for answers to the following questions: 214. 214.
How How muc much h cos costt was was incu incurr rred ed in 201 2012 2 A. P660 P660,0 ,000 00 B. P600 P600,0 ,000 00 C. P560 P560,0 ,000 00 D. P500 P500,0 ,000 00
215.. 215
What What perce percenta ntage ge of the proj project ect was comple completed ted by the the end end of 2012 2012 A. 65% B. 60% C. 55% D. 79%
216.. 216
What What was was the the total total estima estimated ted gross gross profit profit on the the proje project ct by by the the end of 2012 2012 A. P300 P300,0 ,000 00 B. P180 P180,0 ,000 00 C. P250 P250,0 ,000 00 D. P350 P350,0 ,000 00
217.. 217
What What was the esti estimat mated ed cost cost to to comple complete te the the projec projectt at the the end end of 2012? 2012? A. P660 P660,0 ,000 00 B. P500 P500,0 ,000 00 C. P650 P650,0 ,000 00 D. P680 P680,0 ,000 00 (Guerrero, 2013)
218. The Tamiya Builders was recently awarded a P2,800,000 contract to construct a shopping mall for Rustan Inc. Tamiya Builders estimates it will take 42 months to comp comple lete te the the cont contra ract ct.. Th Thee comp compan any y uses uses the the cost cost-t -too-co cost st meth method od to esti estima mate te prof profit its. s. Th Thee following data are available for the year 2010 to 2013 Year
Actual cost each year
Estimated cost to complete
2010 201 2012 2013
P1,300,000 660,000 480,000 340,000
P1,360,000 780,000 380,000 -0-
How much is the realized gross profit (loss) in 2012 A. P(20 P(20,0 ,000 00)) B. P(62 P(62,9 ,918 18)) C. P22,918 918 D. P(22 P(22,9 ,918 18)) (Guerrero, 2013)
219. The followi following ng data data pertains pertains to Havianas Havianas Builders, Builders, Inc. which uses the percent percentage age of completion method Project A Project B Project C Project D Contract Price Cost incurred,2012 Estimated cost to complete,2012 Cost incurred, 2013 Estimated cost to complete,2013
P2,900,000 1,680,000 1,120,00
P3,400,000 1,440,000 1,760,000
P1,700,000 320,000 960,000
P2,000,000 -0-0-
960,000 -0-
680,000 1,360,000
863,000 117,000
560,000 1,040,000
How much is the net income for the year ended 2012 and 2013: A. P135, P135,00 000; 0; 309,0 309,000 00 B. P135, P135,00 000; 0; 489,0 489,000 00 C. P195, P195,00 000; 0; 429,0 429,000 00 D. P369, P369,00 000; 0; 135,0 135,000 00 (Guerrero, 2013)
220. Joys Construction Company has used the cost-cost method of computing the percentage of completion to recognize revenue. Total contract price was P10,000,000. The following data are available from 2011 to 2013:
2011
2012
2013
Realized gross profit (loss), current year
P 200,000
P 700,000
P (100,000)
Cost incurred each year
1,800,000
?
4,100,000
How much is the total estimated gross profit on the project by the end of 2012? 2 012? A. P 1,7 1,750 50,0 ,000 00 B. P2,2 P2,250 50,0 ,000 00 C. P1,5 P1,500 00,0 ,000 00 D. P1,1 P1,166 66,6 ,667 67 (Guerrero, 2013) 221. 221. Unde Underr IAS 11, 11, Cons Consttruct ructiion Cont Contra ract ctss, when hen it is prob probab able le that that total otal cont contra ract ct cost costss on a fixed price contract will exceed total contract revenue, the expected loss should be A. Set off against against profits profits on other other contracts contracts whereby whereby available. available. B. Recognized Recognized as expense immedia immediately, tely, unless unless revenue revenue to date exceed costs costs to date. C. Apportioned Apportioned to the years years of contract contract according according to the stage of completi completion on method. D. Recognized Recognized as as an expense expense immediat immediately. ely. (Punzalan, 2016) 222. A building contr ntractor has a con contract to cons onstruct uct a larg arge buil uilding. It is estimated that the building will take 2 yea years to com ompl pleete. Progress ess billings will be sent to the customer at quar quarte terl rly y inter nterva vals ls.. Whic Which h of the the follo ollowi wing ng des descri cribes bes the the pref prefer erab able le poin pointt for reven evenue ue recognition for this contract? A. After After the the contrac contractt is signed signed.. B. As progress progress is made made toward toward completion completion of of the contract contract.. C. As cas cash h is recei received ved.. D. When When the contra contract ct is compl complete eted. d. (Punzalan, 2016) 223.
Contract Contract costs costs of a construc construction tion contract contract compri comprise se all all of of the the follow following, ing, except A. Costs that directly directly relate relate to the the specific specific contract. contract. B. Costs that are att attributable to cont ontract acti ctivity in gen general and can be alloca ocated to the contract. C. Such other her costs that are are spec pecifically char hargeab eable to the customer under the terms of the contract.
D. General administration costs for which reimbursement is not specified in the contract. (Punzalan, 2016 ) 224. The palace Co., a construction company, has December 31 year end. It is to build a factory for a client and has scheduled its work as follows: March 20, 2016
Contract to be awarded and signed.
April 25, 2016
Construction work to commence.
November 27, 2016
Principal construction work to be completed.
December 30, 2016
Final completion of contract.
In acco accord rdan ance ce with with IAS IAS 11, 11, Cons Constr truc ucti tion on Cont Contra ract cts, s, the the maxi maximu mum m expe expect cted ed peri period od over over which the costs attributable to the contract should accumulated is A. March March 20, 2016 2016 to Decem December ber 30, 30, 2016 B. April April 25, 25, 2016 to to Novembe Novemberr 27, 2016 2016 C. April April 25, 25, 2016 to to Decembe Decemberr 30, 2016 2016 D. March March 20, 2016 2016 to Novem November ber 27, 27, 2016 (Punzalan, 2016) 225. The percentage of completion method that may be used to account for construction contracts can be justified on the basis that: A. The contractor contractor will be continuous continuously ly working and therefore therefore earning earning revenue. revenue. B. In most long-term construction projects, payments are made periodically throughout the life of the contract allowing revenue to be recognized. C. It is unre unreas ason onab ablle to expe expect ct a cont contrract actor to reco record rd reven evenue ue only only when when cons constr truc ucttion ion is completed. D. The con contracti cting firm has a basi asis for measu asuring completion at particular inte nterim dates. (Punzalan, 2016) 226.. 226
The Thing Thing Co. Co. has just just complet completed ed a 4-year 4-year contra contract ct to which which the the follow following ing relat relate: e: Labor and material costs
1,800,000
Machinery cost
600,000
Initial design cost
100,000
Disposal proceeds of machinery
50,000
What are the total contract costs, according to IAS 11, Construction Contracts?
A. B. C. D.
2,35 2,350, 0,00 000 0 1,90 1,900, 0,00 000 0 2,45 2,450, 0,00 000 0 2,50 2,500, 0,00 000 0 (Punzalan, 2016)
227. C & J Construction, Inc. consistently used the percentage of completion method of reco recogn gniz izin ing g inco income me.. Last Last year year C & J star starte ted d work work on a P4,5 P4,500 00,0 ,000 00 cons constr truc ucti tion on cont contra ract ct,, whic which h was was comp comple lete ted d this his year year.. Th Thee acco accoun untting ing recor ecords ds disc disclo lossed the the fol followi lowing ng data data for last year: Progress billings
P1,650,000
Cost incurred
1,350,000
Collections
1,050,000
Estimated cost to complete
2,700,000
How much revenue should C & J recognize on this contract last year A. 105, 105,00 000 0 B. 150,000 000 C. 300,000 000 D. 350, 350,00 000 0 (Punzalan, 2016)
228. Mill Construction Co. uses the percentage of completion method of accounting. Duri During ng 2016 2016,, Mill Mill cont contrract acted to buil build d an apar aparttment ment comp comple lex x for Drew rew for P20, P20,00 000, 0,00 000. 0. Mill estimated that total costs would amount to P16,000,000 over the period of cons constr truc ucti tion on.. In conn connec ecti tion on with with this this cont contra ract ct,, Mill Mill incu incurr rred ed P2,0 P2,000 00,0 ,000 00 of cons constr truc ucti tion on cost cost duri during ng 2016 2016.. Mill Mill bill billed ed and and coll collec ecte ted d P3,0 P3,000 00,0 ,000 00 from from Drew Drew in 2016 2016.. What What amou amount nt should Mill recognize as gross profit for 2016? A. 250, 250,00 000 0 B. 375,000 000 C. 500,000 000 D. 600, 600,00 000 0 (Punzalan, 2016) 229. The Tiger Co. has entered into a 5-year fixed price construction contract to build a fact factor ory. y. Th Thee cont contrract act valu valuee is P20, P20,00 000, 0,00 000 0 and and the est estimat imated ed cost costss are are P16, P16,00 000, 0,00 000. 0. At the end of the first year, Tiger can estimate the outcome of the contract reliably. It has rece receiived ved cas cash paym paymen ents ts to the the valu valuee of P8,6 P8,600 00,0 ,000 00 and and incu incurr rred ed cos costs of P6,0 P6,000 00,0 ,000 00.. At
the end of the first year, what amount should be recognized as revenue in the financial statements, according to IAS 11, Construction Contracts? A. 3,20 3,200, 0,00 000 0 B. 7,50 7,500, 0,00 000 0 C. 6,00 6,000, 0,00 000 0 D. 8,60 8,600, 0,00 000 0 (Punzalan, 2016) 230. Build-It Corp. is constructing a building and has signed a fixed-price two-year cont contrract act for P21 P21 mill millio ion. n. It has has incu incurr rred ed the the fol followi lowing ng cos cost relat elatiing to the cont contra ract ct by the the end of first year: Materials
P 5.0 million
Labor
2.0 million
Construction overhead
2.0 million
Marketing
0.5 million
Depreciation of idle plant and equipment
0.5 million
At the end of Year-1, it has est estimated cost to com complete ete the contract act at P9 million. What hat profit or loss from the contract should Build-It recognize recognize at the end of Year-1? A. 1.5 1.5 mil milli lion on B. 1.0 1.0 mill millio ion n C. 1.05 1.05 mill millio ion n D. 1.28 1.28 mill millio ion n (Punzalan, 2016) 231. 231. POC POC Comp Compan any y acco accoun unts ts for for a long long-t -ter erm m cons constr truc ucti tion on cont contra ract ct usin using g the the perc percen enta tage ge-o -of f com completi etion method. As of the end end of the curr urrent fiscal yea year, the followi owing inform ormation was available regarding a project expected to be completed in the following year: Cumulative progress billings $400,000 Cumulative costs incurred 300,000 Cumulative revenues recognized 80,000 The diff The differ eren ence ce betw betwee een n cons constr truc ucti tion on in prog progre ress ss and and prog progre ress ss bill billin ings gs shou should ld be repo report rted ed in the statement of financial position for the current cu rrent year as A. A curren currentt asset asset of $20,000 $20,000.. B. A curren currentt liabil liability ity of of $20,00 $20,000. 0. C. Unearn Unearned ed revenu revenuee of $100, $100,000. 000. D. A separate separate component component of sharehol shareholders’ ders’ equity equity of $100,000 $100,000
(RPCPA 2016)
232.. 232
The ratio rational nalee for adopti adoption on of the percen percentag tage-o e-of-c f-comp omplet letion ion metho method d is that: that: A. Result Resultss are more conser conservat vative ive.. B. It provides provides a measure measure of periodic periodic accompli accomplishment shment.. C. It is is a better better match match with with legal legal ownershi ownership. p. D. It resu results lts in in a lower lower income income tax tax (RPCPA 2016)
233. How should earned but unbilled revenues at the balance sheet date on a long-term cons constr truc ucti tion on cont contrract act be disc discllosed osed if the perc percen enta tage ge--ofof-com complet pletiion metho ethod d of reven evenue ue recognition is used? A. In a footnote to the financial financial statement statementss until the customer customer is formally formally billed billed for the portion of the work completed. B. As a receivable receivable in the the noncurrent noncurrent asset asset section section of the balance balance sheet. sheet. C. As a constructio construction n in progress progress in the noncurrent noncurrent asset asset section section of the balance balance sheet. D. As constructi construction on in progress progress in the current current asset section section of the the balance sheet sheet (RPCPA 2016)
234. In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year to the A. Total Total costs costs incur incurred red to date date.. B. Unbilled Unbilled portio portion n of the contrac contractt price. price. C. To Tota tall estim estimat ated ed cost cost D. Total Total contrac contractt price price (RPCPA 2016) 235. If a company uses the completed-contract method of accounting for long-term con construct uction con contracts, then dur during the period of construction, on, financ ancial info nformati ation related to a long-term contract will A. Appear on both both the income statement statement and and balance sheet sheet during the the construction construction period
B. Appear only only on the income income statement statement during the the period period of constructi construction. on. C. Appear only only on the balance balance sheet sheet during during the period period of construct construction ion D. Not appear on the the financial financial statements statements (RPCPA 2016)
236. In accounting for a long-term construction contract for which there is a projected profit, the balance in the Construction in Progress account at the end of the first year of work using the percentage-of-completion method would be A. zero. B. The same same as as the completed-co completed-contract ntract method. method. C. Higher than the completed-co completed-contract ntract method D. Lower than the the completedcompleted-contra contract ct method method (RPCPA 2016) For Items #237-238, use the following information:
Moon View Desert Homes constructed a subdivision of upscale homes north of Cave Creek, Arizona, during 2003 and 2004 under contract with Empire Development. Relevant data are summarized below: Contract Amount $2,000,000 2003 2004 Cost 800,000 600,000 Gross Profit 350,000 250,000 Contract Billings 1,000,000 1,000,000 237. Moon View uses the percentage-o e-of-com completi etion method to recog cognize revenu enue. What would be the journal entry made in 2003 to record revenue? A. Account Accountss receiv receivabl ablee 1,000,00 1,000,000 0 Revenue from long-term contracts 1,000,000 B. Account Accountss receiv receivabl ablee 1,350,00 1,350,000 0 Gross profit Revenue from long-term contracts
350,000 1,000,000
C. Constr Construct uction ion in progre progress ss 1,150,0 1,150,000 00 Cost of construction Revenue from long-term contracts
350,000 800,000
D.
Account Accountss receiv receivabl ablee 1,350,00 1,350,000 0 Billings in excess of cost Revenue from long-term contracts
350,000 1,000,000 (RPCPA 2016)
238.. 238
In its its Decem December ber 31, 31, 2003 2003 balan balance ce sheet sheet,, Moon Moon View View would would repor report: t: A. The asset, asset, cost and and profits profits in excess excess of billing billingss of $150,000. $150,000. B. The liabilit liability, y, billings billings in in excess excess of cost cost of $200,000 $200,000 C. The asset, asset, contract contract amount amount in excess excess of billings billings of $1,000,00 $1,000,000. 0. D. The asset, asset, deferred deferred profit profit of of $400,000 $400,000 (RPCPA 2016)
239. Under 239. Under the perc percent entage age of compl completi etion on method method , the the net income income to be be recogni recognized zed for for the first year of a three-year construction contract is to be determined on the basis of the ratio of . A. Estimated Estimated cost cost to complete complete to total total estimated estimated costs. costs. B. Costs incurred incurred to date date to total total estimate estimated d costs C. Actual costs incurred incurred to total total estimat estimated ed costs. costs. D. Total estimat estimated ed costs to estimated estimated costs costs to complete complete (RPCPA 2016) 240. If the Construction in Progress account has a balance of P1,000,000 while the Prog Progre ress ss Bill Billin ings gs on Cont Contra ract ctss acco accoun unt’ t’ss bala balanc ncee is P800 P800,0 ,000 00,, how how shou should ld thes thesee acco accoun unts ts be reflected on the balance sheet? A. Constructi Construction on in Progress Progress will will be shown as a current current asset. asset. B. Progress Progress Billings Billings on Contracts Contracts will will be shown as a current current liability. liability. C. The difference difference between between the two accounts accounts will will be reflected reflected as a current current asset. asset. D. The difference difference between between the two accounts will will be reflected reflected as a current liability liability (RPCPA 2016)
241. Under 241. Under the perc percent entage age of compl completi etion on method method,, contrac contractt revenue revenue for for the the period period is computed A. By multiplying multiplying the percentagepercentage-of-com of-completi pletion on to the transaction transaction price.
B. By dividing dividing the contract contract price by the percentage percentage-of-c -of-complet ompletion ion and deducting deducting revenues already recognized in the prior periods. C. By multiplying multiplying the percentagepercentage-of-com of-completi pletion on to the contract price price and deducting deducting revenues already recognized in the prior periods. D. By multiplying multiplying the percentagepercentage-of-com of-completi pletion on to the contract price price and adding revenues already recognized in the prior periods. (Millan, 2016) 242.. 242
Under Under the the zero-p zero-prof rofit it meth method, od, cont contrac ractt revenu revenuee for the peri period od is A. Eq Equa uall to zero zero B. Equal to the the costs of constructio construction n recognized recognized during during the period period C. Equal to the contract contract price price divided divided by the estimated estimated constructio construction n period D. Equal to the costs of construct construction ion recognized recognized during the period period that are probable probable of recovery (Millan, 2016)
243. A contractor enters into contact with a customer to construct a building. It is estimated that the building will take 2 years to complete. The entity assesses its performance obligation in accordance with the principles in PFRS 15 and concludes that the perf erform ormance obligati ation is satisfied over time. Progr ogress bil billings will be sent to the cust custom omer er at quar quarte terl rly y inte interv rval als. s. Whic Which h of the the foll follow owin ing g desc descri ribe bess the the pref prefer erab able le poin pointt for for revenue recognition for this contract? A. After After the the contrac contractt is signed signed.. B. As progress progress is is made towards towards the the completion completion of the the contract. contract. C. As cas cash h is recei received ved.. D. When When the contra contract ct is compl complete eted. d. (Millan, 2016) 244. Which of the following does not indicate that a customer can benefit from a good or ser service vice eith either er on its its own own or toget ogethe herr wit with othe otherr res resour ources ces that hat are are readi eadily ly avai availlabl able to the the customer? A. The good or service service could be used, used, consumed, consumed, sold for an amount amount that is greater greater than scrap value, or otherwise held in a way that generates economic benefits. B. The fact that that the entity entity regularly regularly sells sells a good or service service separately. separately. C. The fact that that the entity entity has no no alternative alternative use use for the good good or service. service. D. All of of these these are are indica indicator tors. s. (Millan, 2016)
245. An entity’s perf erformance obli bligation under der a long ong-term construction contr ntract will be satisfied at a point in time. Revenue is recognized when recorded progress billings Are collected A. Yes B. No C. No D. Yes
Exceed recorded costs Yes Yes No Ye s No No
(Millan, 2016)
246. An entity uses the inputs uts method based on costs incur curred to measure its progre gress on a performance obligation that is satisfied over time. Which of the following items would affect the entity’s computation for the revenue to be recognized each year? Revenue previously recognized Progress billings to date
A. B. C. D.
Yes Yes No No
Ye Yes No Yes No (Millan, 2016)
247. An entity uses the out output puts method hod base ased on surveys eys of work perf erform ormed to measu asure its progress on a performance obligation that is satisfied over time. Which of the following items would affect the entity’s computation for the revenue to be recognized each year? Receivable
Collection on Progress billings
A. B. C. D.
Yes Y es No Yes No
Yes Yes No No
(Millan, 2016)
248. DJ Builders, Inc. has consistently used the percent-of-completion method of accounting for construction-type contracts. During 2015, DJ started work on a P9,00 P9,000,0 0,000 00 fixed fixed pric pricee const constru ruct ctio ion n contr contrac actt that that was was comp comple lete ted d in 2016. 2016. DJ DJ’s ’s accou account ntin ing g records disclosed the following:
Cumulative co contract costs incurred Estimated total costs at completion
12/31/2015 P3,900,000 7,800,000
12/31/2016 P6,300,000 8,100,000
How much income would DJ have recognized on this contract for the year ended December 31, 2016? A. P100 P100,0 ,000 00 B. P300 P300,0 ,000 00 C. P600 P600,0 ,000 00 D. P700 P700,0 ,000 00 (Dayag, 2015) 249. Uberita Corp. ent entere ered into a con construct uction agre greemen ementt in 2015 that hat called for a con contract price of P9,600,000. At the beginning of 2016, a change order increased the initial cont contrract act pri price by P480 P480,0 ,000 00.. Th Thee comp compan any y uses uses the per percent centag agee-of of--comp comple leti tion on bas basis of revenue recognition. In relation to the project, the following data are obtained:
Cost incurred to date Est’d costs to complete Billings made Collection made
20 15 P4,920,000 4,920,000 5,280,000 4,380,000
2 0 16 P8,640,000 2,160,000 8,520,000 7,500,000
What gross profit (loss) should Uberita Corp. recognize in 2016? A. P120,00 P120,000 0 gross gross profit profit B. P240, P240,00 000 0 gros grosss loss loss C. P480, P480,00 000 0 gros grosss loss loss D. P720,00 P720,000 0 gross gross loss loss (Dayag, 2015)
250. On September 30, 2016, Jaja Co., Inc. was awarded the contract to build a 1,000-room hotel for P120 million. Among others, the parties agreed to the following: 1. Ten percent percent mobilizati mobilization on fee (deducted (deducted from from “final “final billing”) billing”) payable payable within within ten days from the signing of the contract; 2. Retention Retention of ten ten percent on on all billings billings (to (to be paid with with the final final billing, billing, upon completion and acceptance of the project); and 3. Progress Progress billing billingss are to be paid within within 2 weeks upon acceptance acceptance.. By the end of 2016, the company any had present ented one progress ess billing, correspondi nding to 10% 10% com complet pletio ion, n, whi which was was eval evalua uate ted d and and acce accept pted ed by the the cli client ent on Dece Decem mber ber 29, 29, 2016 2016 for payment in January of the next year. In 2016, assuming use of the
percentage-of-completion method of accounting, Jaja Co., Inc. received cash a total fee of: A. P1,2 P1,200 00,0 ,000 00 B. P11, P11,80 800, 0,00 000 0 C. P12, P12,00 000, 0,00 000 0 D. P13, P13,20 200, 0,00 000 0 (Dayag, 2015) 251. In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be A. the terms terms of payment payment in the the contract. contract. B. the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable. C. the method commonly used by the contractor to account for other long-term construction contracts. D. the inherent inherent nature of the contractor's contractor's technical technical facilities facilities used in construction. construction. (Comprehensive Reviewer, Hilario Tan) 252. The use of the percentage of completion method of accounting for long term construction contracts is a measurement of revenue under the A. Cost Cost pri princi ncipl ple. e. B. Realiz Realizati ation on princi principle ple.. C. Object Objectivi ivity ty princi principle ple D. Mon Moneta etary ry princi principle ple.. (Comprehensive Reviewer, Hilario Tan) 253. When work to be done and costs to be incurred on a long-term contract can be estimated dependably, which of the following methods of revenue recognition is preferable? A. Instal Installme lment nt method method B. Comple Completed ted-co -contr ntract act meth method od C. Percen Percentag tage-o e-of-c f-compl ompleti etion on method method D. None None of of the these se (Comprehensive Reviewer, Hilario Tan) 254. Which hich of the following is not not an element identified by the AICPA as bein eing necess essary ary in order to use percentage-of-completion accounting? A. The construct construction ion period period can be reasonably reasonably estimat estimated. ed. B. The buyer can can be expected expected to satisfy satisfy obligati obligations ons under the the contract. contract.
C. Dependable Dependable estimates estimates can be made made of the extent of progres progresss toward completi completion. on. D. Dependable Dependable estimates estimates can be made made of contract contract costs. costs. (Comprehensive Reviewer, Hilario Tan) 255. JUMBO Corp. uses the percentage-o e-of-com ompl pleetion method of revenu enue reco ecognit nition in acco accoun untting ing for its its longong-te term rm cons constr truc ucttion ion cont contra ract ctss. JUMBO UMBO Corp Corp.’ .’ss prog progrress ess bil billing lingss account is a A. Reve Revenue nue accou account nt.. B. Non-cu Non-curre rrent nt liabil liability ity account account.. C. Contra Contra curr current ent asse assett account account.. D. Contra Contra non-cur non-current rent asset account. account. (Comprehensive Reviewer, Hilario Tan) 256. The profession requires that the percentage-of-completion method be used when certain conditions exist. Which of the following is not one of those necessary conditions? A. Estimates Estimates of progress progress toward toward completion, completion, revenues, revenues, and costs are reasonabl reasonably y dependable. B. The contractor contractor can can be expected expected to perform perform the contract contractual ual obligation obligation.. C. The buyer can be expected expected to satisfy satisfy some of the the obligations obligations under under the contract. contract. D. The contract contract clearly clearly specifies specifies the enforceable enforceable rights rights of the parties, parties, the consideration to be exchanged, and the manner and terms of settlement. (Comprehensive Reviewer, Hilario Tan) For Items #257-269, use the following information:
The following information pertain to installment sales of Uniwide Variety Store: Down payment: 20% ■ Instalment sales: P545,000 in Year 1, P785,000 in Year 2, and P968,000 in Year 3 ■ ■ Markup on cost: 35% Collections after down payment: 40% during the year of sale, 35% during the year ■ after sale, and 25% on the third year 257. 257.
The real The realiz izat atio ion n gros grosss prof profit it for for Year Year 1 is A. P73, P73,47 474 4 B. P99,190 190 C. P109 P109,3 ,357 57 D. P114 P114,8 ,825 25
258. The unreali unrealized zed gross gross profit profit for for the the installm installment ent sales sales made during Year 2 as at the the end of Year 2 is
A. B. C. D.
P97, P97,68 689 9 P114 P114,0 ,063 63 P131 P131,8 ,880 80 P141 P141,1 ,112 12
259.. 259
The inst install allmen mentt accoun accounts ts rece receiva ivable ble at at the the end of Year Year 3 is A. P602 P602,9 ,991 91 B. P621 P621,6 ,640 40 C. P652 P652,7 ,722 22 D. P685 P685,3 ,358 58
260.
Using the same same inform information, ation, the unreali unrealized zed gross gross profit profit at the end end of Year 3 is A. P161 P161,1 ,166 66 B. P198 P198,5 ,574 74 C. P211 P211,0 ,047 47 D. P217 P217,5 ,574 74 (Lupisan, 2016)
261. It is a contract specifically negotiated for the construction of an asset or a comb combin inat atio ion n of asse assets ts that that are are clos closel ely y inte interr rrel elat ated ed in term termss of thei theirr desi design gn,, tech techno nolo logy gy and and function or their ultimate purpose or use. A. Constr Construct uction ion contra contract ct B. Inst Instal alme ment nt contra contract ct C. Franc Franchi hise se cont contra ract ct D. Consig Consignmen nmentt contrac contractt (CPAR, handouts 2018) 262. It is a cons onstruct uction con contract in which the contract actor agre grees to fixed a cont ontract price, or a fixed rate per unit of output, which in some cases is subject to cost escalation clauses. A. Fixed Fixed price price contrac contractt B. Cost Cost plu pluss cont contra ract ct C. Vari Variab able le cont contra ract ct D. Mixe Mixed d con contr tract act (CPAR, handouts 2018) 263. It is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee. A. Fixed Fixed price price contrac contractt B. Cost Cost plu pluss cont contra ract ct
C. Vari Variab able le cont contra ract ct D. Mixe Mixed d con contr tract act (CPAR, handouts 2018)
264. Which hich of the followi owing accoun ounting change nges shall all be treat eated retrospectivel vely inst nstead prospectively by long-term construction contractor? A. Change Change in the const construc ructio tion n revenue revenue B. Change in in the estimated estimated costs to complete complete the the contract contract C. Change in in the estimate estimate of of the outcome outcome of of the contract contract D. Change from from percentage percentage of completion completion to cost cost recovery recovery method or vice versa versa (CPAR, handouts 2018)
265. Which of the following cost shall be excluded in the contract costs of construction contract? A. Costs relate relate directly directly to the the specific specific contract contract B. Costs that that are directly directly attribut attributable able to contract contract activity activity in general general and can be allocated to the contract C. Such other costs costs as are specifi specifically cally chargeable chargeable to the customer customer under under the terms terms of the contract D. Selling Selling costs such as advertise advertisement ment expense expense or commissions commissions of real agents or brokers. (CPAR, handouts 2018) For Items #266-268, use the following information:
On July 1, 2020, ABC Construction Corp. Contracted to build an office building for XYZ, Inc. for a total contract price of P975, 000. 2020 2021 2022 Contract cost incurred to date 75, 000 600, 000 1, 050, 000 Estimated costs to complete the contract 675, 000 400, 000 – Billings to XYZ, Inc. 150, 000 550, 000 275, 000 266. Under 266. Under the the perc percent entage age of of compl completi etion on metho method, d, how how much much is is the the Construction-in-Progress at Dec. 31, 2021? A. 650, 650, 000 000 B. 575, 00 000 C. 672, 00 000 D. 597, 597, 000 000
267. Under the zero-profit zero-profit method, how much is the Construction Construction-in-P -in-Progre rogress, ss, net of of Progress Billings at Dec. 31, 2021? A. (125 (125,, 000) 000) B. 125, 00 000 C. 50, 00 000 D. (50, 50, 000 000)) 268. Under the percentage percentage of completion completion method, method, how much is the the realize realized d gross gross profit/ profit/ (loss) at Dec. 31, 2022? A. (75, 75, 000 000)) B. (100, 100, 000) 000) C. (50, 50, 000) 000) D. (72, 72, 500 500)) (CPAR, handouts 2018) For Items #269-270, use the following information: On Janu anuary 1, 2018, Soli olid Company acce ccepted a long-term erm construction pro project for an initial contract price of P1, 000, 000 to be completed on June 30, 2020. On January 1, 2019, the cont contra ract ct pric pricee was was incr increa eassed to P1, P1, 500, 500, 000 000 by reas eason of chan change ge in the desi design gn of the proj projec ectt. Th Thee out outcom come of the cons consttruct ructiion cont contra ract ct can can be esti estima mate ted d reli eliabl ably. Th Thee proj projec ectt was was comp comple lete ted d on Decembe emberr 31, 202 2020 which resulted to penalt alty amounting P200 200, 000. 00. The entity pro provided the following data concerning the direct costs related to the said project for 2018 and 2019.
Costs during the year Remaining estimated costs to complete at year-end
2018 440, 000 660, 000
2 01 9 680, 000 280, 000
269.. 269
What What is the the realiz realized ed gross gross prof profit it for for the year year ended ended Decem December ber 31, 31, 2019? 2019? A. 200, 200, 000 000 B. 80, 00 000 C. 180, 00 000 D. 100, 100, 000 000
270.. 270
What What is the the balance balance of of constr construct uction ion in in progre progress ss on Decem December ber 31, 31, 2019? 2019? A. 1, 200, 200, 000 000 B. 1, 020, 020, 000 000 C. 1, 120, 120, 000 000 D. 900, 900, 000 000 (CPAR, handouts 2018)
271. Which hich of the following projects und undertaken ken by an ent entity shou hould be acc account unted for as sa a construction contract? A. A warehouse warehouse being being constructed constructed for for the entity’s entity’s own own use B. An office office block being being construct constructed ed as an investment investment property property C. An item of of plant and and machinery machinery being constru constructed cted to be sold sold as inventory inventory D. A large boat being construct constructed ed for a third party under a specifical specifically ly negotiated negotiated contract (Valix 2012) 272.. 272
In a constru constructi ction on cont contrac ract, t, the term term “clai “claims” ms” means means A. The initial initial amount amount of of revenue revenue agreed agreed in the contra contract ct B. An additional additional amount paid paid to the contractor contractor if specified specified performance performance standards standards are met or exceeded C. An instruction instruction by the customer customer for for a change in the scope scope of work to be performed performed under the construction contract D. An amount that that the contractor contractor seeks seeks to collect collect from the customer customer as reimbursement for cost not included in the construction contract con tract (S,E,&R 2012)
273. It is is an instruction instruction by the customer customer for for a change in the the scope scope of work to be performed performed under a construction contract A. Claim B. Var Variati iation on C. Incen Incenti tive ve pay payme ment nt D. Initia Initiall amou amount nt agreed agreed (Valix 2012) 274. It is is an additional additional amount amount paid to the the contracto contractorr if specified specified perfor performance mance standards standards are met or exceeded A . B onu s B. Clain C. Incen Incenti tive ve pay payme ment nt D. Vari Variat atio ion n (Valix 2012) For Items #275-277, use the following information: Sign Signet et Erec Erecto torrs, Inc. Inc. use use the the cos cost-to t-to-c -cos ostt bas basis in det determi ermini ning ng the the perc percen enta tage ge of comp comple leti tion on for for reve revenu nuee reco recogn gnit itio ion. n. Th Thee cons constr truc ucti tion on comp compan any’ y’ss reco record rdss show show the the foll follow owin ing g info inform rmat atio ion n on a recently completed project for a contract price of P5,000,000
2012
2013
2014
Actual costs incurred to date
P900,000
P2,550,000
P?
Gross profit (loss) recognized each year
100,000
350,000
(50,000)
275. If the revenue recognized thru the end of 2013 was P3,000,000, how much was the estimated cost to complete the project at December 31,2013? A. P1,5 P1,500 00,0 ,000 00 B. P1,6 P1,600 00,0 ,000 00 C. P1,7 P1,700 00,0 ,000 00 D. P2,0 P2,000 00,0 ,000 00 276.. 276
How much much was was the the actual actual cost cost incu incurre rred d duri during ng 2014? 2014? A. P1,7 P1,750 50,0 ,000 00 B. P1,9 P1,900 00,0 ,000 00 C. P2,0 P2,050 50,0 ,000 00 D. P2,2 P2,200 00,0 ,000 00
277. If the cost-to-cost percentage of completion was 20% thru the end of 2012, and the customer was billed corresponding to 19% of the contract price, the project will be recognized at December 31, 2012 as A. An ass asset et of of P50, P50,000 000 B. An ass asset et of of P950 P950,00 ,000 0 C. A liab liabili ility ty of P50,000 P50,000 D. A liabi liabilit lity y of P1,0 P1,000,0 00,000 00 ( PRTC PRTC 1405) For Items #278-280, use the following information:
On Janu Januar ary y 1, 2015 2015,, Brav Bravee Cons Constr truc ucttion ion Cor Corp. bega began n cons constr truc ucti ting ng a P2,1 P2,100 00,0 ,000 00 cont contrract act. Th Thee following are rele elevan vant info nformation provid vided by the corp orporation. Brave ave eus euses perc ercent entage age of comp comple leti tion on meth method od.. For For the the year year ende ended d Dece Decemb mber er 31, 31, 2016 2016,, Brav Bravee Cons Constr truc ucti tion on bill billed ed its its clie client nt an additional 55% of the contract price
Construction in progress
2015
2016
2017
P441,000
?
?
Estimated costs to complete Costs incurred
?
?
--
425,250
969,000
675,750
330,750 current liability
--
Excess of Construction in Progress over 84,000 current liability Billings
278.. 278
How much much is is the the esti estimat mated ed remai remainin ning g cost cost in 2015? 2015? A. P1,5 P1,599 99,7 ,750 50 B. P1,5 P1,555 55,0 ,000 00 C. P1,6 P1,680 80,0 ,000 00 D. P1,5 P1,584 84,0 ,000 00
279.. 279
How much much is the realiz realized ed gros grosss profi profitt (los (loss) s) in 2016? 2016? A. P(45 P(45,0 ,000 00)) B. P15,750 750 C. P(60 P(60,7 ,750 50)) D. P30, P30,00 000 0
280.. 280
How much much is the balance balance of cons constru tructi ction on in progre progress ss in in 2016? 2016? A. P1,6 P1,680 80,0 ,000 00 B. P2,0 P2,010 10,7 ,750 50 C. P1,3 P1,349 49,2 ,250 50 D. P1,3 P1,365 65,0 ,000 00 ( PRTC PRTC 1405)
