time 10. Long-term construction contracts require accounting for construction in progress as well as billings to customers. III. PROBLEMS Problem 1: In 2020, DJ Builders Construction agreed to construct an apartment building at a price of P2,000,000. The information relating to the costs and billings for the contract is as follows: 2020 2021 2022 Direct and allocable costs to date 560,000 1,200,000 1,570,000 Estimated costs yet to be incurred 1.040,000 400,000 Customer billings each year 750,000 560,000 730,000 Collection of billings each year 560,000 640,000 840,000 During 2021 the customer agrees to a variation with increases expected revenue from the contract by 40,000 and causes additional costs of 20,000. At the end of 2020, there are materials stored on site for use in 2021 which cost 16,000 during the period. Required: A. Prepare journal entries each year using: (a) Percentage-of-completion (b) Cost Recovery method assuming that at the beginning and end of 2020 (also in 2021) the contractor cannot estimate the outcome of the contract with sufficient reliability to estimate the project's percentage of completion. It is highly likely that the contract price will be received from the customer. However, it is probable that the costs incurred in 2020 and 2021 will be recoverable. The contract was completed in 2022. B. Determine the following using (a) Percentage of Completion and (b) Cost Recovery Method: 1. The balance sheet in 2020, 2021 and 2022 would report a current asset (current liability) of: 2. The revenue recognized in 2020, 2021 and 2022. 3. The construction costs in 2020, 2021 and 2022. 4. The gross profit recognized in 2020, 2021 and 2022. Problem 2: DJ Builders Construction enters into a contract with a customer to build a warehouse for 850,000 on