1.) In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs incurred plus 20% thereof. However, if the project is completed within 4 years, ABC will receive an additional payment of 200,000. Information on the project is shown below:

Costs incurred to date 20x1 - 2,400,000 20x2 - 4,575,000 20x3 - 6,125,000

Estimated costs to complete 20x1 - 3,600,000 20x2 - 1,525,000 20x3 - 125,000

In 20x1 and 20x2, it was not highly probable that the project will be completed on time. However, in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received.

How much revenue is recognized on the contract in 20x3?

a. 2,595,000

b. 2,610,000

c. 2,056,000

d. 2,022,000

2.)In 20x1, Gorgeous Too Co. enters into a fixed-price construction contract with a customer. At contract inception, Gorgeous Too Co. assesses its performance obligations in the contract and concludes that it has a single performance obligation that is satisfied over time. Gorgeous Too Co. determines that the measure of progress that best depicts its performance on the contract is input method based on costs incurred.

Information on the contract follows:

Cumulative contract costs incurred 20x1 -2,250,000 20x2 - 4,800,000

Cumulative profits recognized 20x1 - 750,000 20x2 - 1,200,000

Progress billings 20x1 - 2,400,000 20x2 - 3,600,000

Collections on progress billings 20x1 - 2,000,000 20x2 - 4,000,000

The contract is completed in 20x2.

How much is the transaction price in the contract?

a. 9,000,000

b. 7,000,000

c. 5,000,000

d. 6,000,000

3.) VALEDICTION Construction Co. entered into an 80M fixed price contract for the construction of a private road for FAREWELL SPEECH, Inc. The performance obligation on the contract is satisfied over time. VALEDICTION measures its progress on the contract using the "cost-to-cost" method. The estimated total contract cost is 40M. VALEDICTION incurred the following costs in the first year of the construction:

Costs of negotiating the contract (charged immediatelyas expense) 400,000

Costs of materials used in construction 12,000,000

Costs of materials purchased but not yet used inconstruction 2,000,000

Site labor costs 4,000,000

Site supervision costs 800,000

Depreciation of equipment used in construction 480,000

Depreciation of idle equipment not used in thecontract 240,000

Costs of moving equipment and materials to and fromthe construction site 160,000

Costs of hiring equipment 560,000

Advance payment to subcontractor (the subcontractedwork is not yet started) 80,000

How much revenue is recognized in the first year of the contract?

a. 25M

b. 45M

c. 46M

d. 36M

4.) On July 1, 20x1, Contractor Co. enters into a contract with a customer for the construction of a building. At contract inception, Contractor Co. assesses the contract in accordance with the principles of PFRS 15 and concludes that it has a single performance obligation that is satisfied over time. Contractor Co. then determines that the appropriate measure of its progress on the contract is input method based on costs incurred. Information on the contract is shown below:

Contract price 600,000

Contract costs incurred during 20x1 120,000

Estimated remaining costs as of Dec. 31, 20x1 240,000

Billings to the customer during 20x1 180,000

Collections on billings during 20x1 60,000

What amounts are presented in Contractor Co's. statement of financial position under Traditional accounting> and PFRS 15>?

a. Gross amount due from (to) cust.- 20,000Contract asset(liability) - (20,000)

b. Gross amount due from (to) cust.- (40,000)Contract asset(liability) - (40,000)

c. Gross amount due from (to) cust.- 20,000Contract asset(liability) - 20,000

d. Gross amount due from (to) cust.- (20,000)Contract asset(liability) - (20,000)

5.) In 20x1, Silverchair Co., a construction company, enters into a contract with a customer for the construction of a building. The contract states a fixed fee of 8,700,000. Silverchair's performance obligation in the contract is satisfied over time. Silverchair uses the 'cost-to-cost' method in measuring its progress in the contract. Information on the contract follows:

Estimated total costs at completion 20x1 - 6,525,000 20x2 - 6,960,000

Percentage of completion - 20x1 - 15% 20x2 - 65%

How much is the profit recognized in 20x2?

a. 1,131,000

b. 978,750

c. 804,750

d. 840,750

6.) In 20x1, Salamagi Co. entered into a contract with a customer. The contract stipulates the following:

Contract price of 20,000,000

5% mobilization fee due upon signing of the contract, to be deducted from the final billing

10% customer retention on all subsequent progress billings, to be paid to Salamagi on completion of the project

7.) Salamagi Co. estimated a 5,000,000 gross profit from the project. The percentage of completion method will be used. In 20x1, Salamagi billed the customer for 50% completion of the project. The customer accepted all the billings, except one for 10% which was accepted on January of the following year. All the accepted billings were collected during the year except an 8% billing which was due January of the following year.

What is the total amount of collections from the billings in 20x1?

a. 5,760,000

b. 6,760,000

c. 7,400,000

d. 6,400,000

What is the amount of profit recognized from the contract in 20x1?

a. 2,500,000

b. 2,650,000

c. 2,900,000

d. 2,720,000

8.) An entity, a construction company, enters into a contract to construct a commercial building for a customer on customer-owned land for a promised consideration of 1 million and a bonus of 200,000 if the building is completed within 24 months. The entity accounts for the promised bundle of goods and services as a single performance obligation satisfied over time because the customer controls the building during construction. At the inception of the contract, the entity expects the following:

Transaction price1,000,000

Expected costs700,000

Expected profit (30%)300,000

At contract inception, the entity does not expect to receive the bonus because it cannot conclude that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Completion of the building is highly susceptible to factors outside the entity's influence, including weather and regulatory approvals. In addition, the entity has limited experience with similar types of contracts.

The entity determines that the input measure, on the basis of costs incurred, provides an appropriate measure of progress towards complete satisfaction of the performance obligation.

Information as of the end of the first year is as follows:

Costs incurred to date420,000

Total expected costs700,000

The entity reassesses the variable consideration and concludes that the amount is still constrained.

In the first quarter of the second year, the parties to the contract agree to modify the contract by changing the floor plan of the building. As a result, the fixed consideration and expected costs increase by 150,000 and 120,000, respectively. In addition, the allowable time for achieving the 200,000 bonus is extended by 6 months to 30 months from the original contract inception date. At the date of the modification, on the basis of its experience and the remaining work to be performed, which is primarily inside the building and not subject to weather conditions, the entity concludes that it is highly probable that including the bonus in the transaction price will not result in a significant reversal in the amount of cumulative revenue recognized. In assessing the contract modification, the entity concludes that the remaining goods and services to be provided using the modified contract are not distinct from the goods and services transferred on or before the date of contract modification; that is, the contract remains a single performance obligation.

How much is the cumulative catch-up adjustment to revenue recognized on the date of contract modification? (round-off percentage of completion to one decimal place only)

a. 92,800

b. 91,200

c. 93,400

d. 89,200

9.) On July 1, 20x1, Contractor Co. enters into a contract with a customer for the construction of a building. At contract inception, Contractor Co. assesses the contract in accordance with the principles of PFRS 15 and concludes that it has a single performance obligation that is satisfied over time. Contractor Co. then determines that the appropriate measure of its progress on the contract is input method based on costs incurred. Information on the contract is shown below:

Contract price 600,000

Contract costs incurred during 20x1 120,000

Estimated remaining costs as of Dec. 31, 20x1 240,000

Billings to the customer during 20x1 180,000

Collections on billings during 20x1 60,000

What amount of revenue is recognized on the contract in 20x1?

a. 240,000

b. 220,000

c. 180,000

d. 200,000