• On January 1, 2021, an entity accepted a long-term construction project for an initial contract
• price of P1,000,000 to be completed on June 30, 2023. On January 1, 2022, the contract price
• was increased to P1,500,000 by reason of change in the design of the project. The project was
• completed on December 31, 2023 which resulted to penalty amounting to P200,000.
• The entity provided the following data concerning the direct costs related to the said project:
• Year 2021
• Year 2022
• Year 2023
• Costs during the year
• P440,000
• P680,000
• P130,000
• Remaining estimated
• costs to complete at
• the end of the year
• P660,000
• P280,000
• -
• The outcome of the construction contract can be estimated reliably.
• 1. What is the realized gross profit (gross loss) to be recognized by the entity for the
• year ended December 31, 2022?
• a. P200,000
• b. P80,000
• c. P180,000
• d. (P20,000)
• 2. What is the balance of construction in progress on December 31, 2022?
• a. P1,200,000
• b. P900,000
• c. P1,120,000
• d. P1,020,000