Use the following information for questions 37 and 38.

In 20x5, Fargo Corporation began construction work under a three-year contract. The contract price is P4,800,000. Fargo uses the percentage-of-completion (over time) method for financial accounting purposes. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 20x5, follow:

Statement of Financial Position

Accounts receivable-construction contract billings P200,000

Construction in progress P600,000

Less contract billings 480,000

Costs and recognized profit in excess of billings 120,000

Income Statement

Income (before tax) on the contract recognized in 20x5 P120,000

37. How much cash was collected in 20x5 on this contract

a. P 40,000

b. P200,000

c. P280,000

d. P480,000

38. What was the initial estimated total income before tax on this contract?

a. P600,000

b. P640,000

c. P800,000

d. P960,000

Use the following information for questions 39 and 40:

Joey Construction specializes in the construction of commercial and industrial buildings. The contractor is experienced in bidding long-term construction projects of this type, with the typical project lasting fifteen to twenty-four months. The contractor uses the percentage-of-completion (over time) method of revenue recognition since given the characteristics of the contractor's business and contracts, it is the most appropriate method. Progress toward completion is measured on a cost-to-cost basis. Joey began work on a lump-sum contract at the beginning of 20x5. As bid, the statistics were as follows:

Lump-sum price (contract price) P4,000,000

Estimated costs

Labor P 850.000

Materials and subcontractor 1.750,000

Indirect costs 400,000 3,000,000

Estimated Gross Profit P1,000,000

At the end of the first year, the following was the status of the contract:

Billings to date P2,250,000

Costs incurred to date

Labor P 464.000

Materials and subcontractor 648.000

Indirect costs 193.000 1,305,000

Latest forecast total cost 3,000,000

It should be noted that included in the above costs incurred to date were standard electrical and mechanical materials stored on the job site, but not yet installed, costing P105,000. These costs should not be considered in the costs incurred to date.

39. Compute the percentage of completion on the contract at the end 20x5.

a. 35.00%

b. 40.00%

c. 43.50%

d. 46.67%

40. Indicate the amount of gross profit that would be reported on this contract at the end of 20x5.

a. P200,000

b. P400.000

c. P540,000

d. P667,000