Problem 3

On July 1, 2017, Dinar obtained a contract to construct a building. The building was estimated to be built at a total cost of P15,000,000 and is scheduled for completion on October 2019. The contract contains a penalty clause to the effect that the other party was to deduct P35,000 from the contract price for each week of delay. On the other hand, if the contractor was able to finish the building earlier than agreed, it will be rewarded an amount equal to P50,000 for every month of early completion. Furthermore, cost escalation clause was included in the contract. In 2018, the estimated costs of particular construction material amounting to P520,000 were bought for P780,000. The increase in the contract price related to this cost escalation was approved by the client. Completion was delayed for 4 weeks. The records show:

2017 2018 2019

Costs incurred P1,750,000 6,440,000 1,085,000

Estimated cost to complete 7,000,000 1,810,000 -

Progress billings 1,400,000 15,225,000 4,200,000

1. What is the Original Contract Price 2017?

2. What is the Original Contract Price 2018?

3. What is the CIP net as of 2018?

Problem 4

CABUGERO DEVELOPMENT COMPANY., started work on a construction contract in 2018. The contract price is P10,000,000. However, if the cumulative inflation reaches or exceeds 25%, the contract price shall be adjusted upward by 10%. Cost escalations on the contract are probable as to recovery. Additional information on the contract is shown below:

2018 2019

Costs incurred to date 2,400,000 4,500,000

Estimated cost at completion 6,000,000 6,000,000

Cumulative inflation rate 18% 27%

1. Compute for the percentage of completion during the year 2018.

2. Compute for the percentage of completion during the year 2019.

3. What is the contract price in 2018?

4. What is the contract price in 2019?

5. What is the realized gross profit in 2018?

6. What is the realized gross profit in 2019?