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ACT191 Quiz 6 on Long-term construction contracts
Accountancy (National University (Philippines))
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ACT191 Quiz 6 on Long-Term Construction
Contracts
3rd term, AY 20-21
11,
Which of the following accounting changes shall be treated retrospectively instead
prospectively by the long-construction contractor?Required to answer. Single choice.
(1/1 Point)
Change from percentage of completion to cost recovery method or vice versa
Change in the estimate of the outcome of the contract
Change in construction revenue
Change in the estimated costs to complete the contract
Correct answers: Change from percentage of completion to cost recovery method or vice versa
22,
Calculate the gross profit to be reported in 2016 using the percentage of completion
method.Required to answer. Single line text.
(1/1 Point)
Correct Answer: 97,800
33,
How much is the Construction In Progress (CIP) account balance at December 31, 2018 using
the percentage of completion method?Required to answer. Single line text.
(1/1 Point)
Correct Answer: 575,000
44,
How much is the realized gross profit(loss) in 2018?Required to answer. Single line text.
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(1/1 Point)
Correct Answer: (95,000)
55,
Determine the estimated cost to complete in 2016?Required to answer. Single line text.
(1/1 Point)
Correct Answer: 1,700,000
66,
The amount collected from the client in 2018 amounted to:Required to answer. Single line text.
(0/1 Point)
Correct answers: 6,650,000
77,
What is the percentage of completion in 2017 of this construction contract? (Round off 2
decimal places and insert % symbol to your answer, eg 25%)Required to answer. Single line
text.
(1/1 Point)
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Correct Answer: 20%
88,
The recognized profit in 2018 using the POC Method is:Required to answer. Single line text.
(1/1 Point)
Correct Answer: 62,500
99,
Revenue from Long Term Construction Contract is calculated or recognizedRequired to answer.
Single choice.
(1/1 Point)
In reference to the billings made to the customer.
By multiplying the contract price by the ratio of cost over the contract price.
Dividing the contract price by the number of years of construction.
After the facility was constructed and delivered to the customer because construction will qualify as revenue
recognized “point in time” per IFRS 15.
By multiplying the contract price by the percentage of completion using the expert estimates.
Correct answers: By multiplying the contract price by the percentage of completion using the expert estimates.
1010,
The following costs shall be capitalized as part of construction in progress or contract costs,
exceptRequired to answer. Single choice.
(1/1 Point)
Costs that re specifically chargeable to the customer under the terms of the contract may include some general
administration costs and development costs for which reimbursement is specified in the terms of the contract.
General and research and development costs for which reimbursement is not specified in the contract.
Costs of hiring and moving of plant and equipment to and from the contract site
Systematically, rationally and consistently allocated construction overheads and borrowing costs.
Correct answers: General and research and development costs for which reimbursement is not specified in the
contract.
1111,
A contract specifically negotiated for the construction of an asset or a combination of assets
that are closely interrelated or interdependent in terms of their design, technology and function
or their ultimate purpose or use.Required to answer. Single choice.
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(1/1 Point)
Franchise contract
Installment contract
Construction contract
Consignment contract
Correct answers: Construction contract
1212,
When it is probable that total contract costs will exceed total contract revenue, how shall it be
accounted for?Required to answer. Single choice.
(1/1 Point)
The expected loss shall be recognized as an expense by reference to the state of completion of the contract
activity at the end of the reporting period when the outcome of a construction contract cannot be estimated reliably.
The expected loss shall be recognized as an expense immediately regardless of the certainty or uncertainty of the
outcome of a construction contract.
The expected loss shall be recognized as an expense immediately only when the outcome of a construction
contract cannot be estimated reliably.
The expected loss shall be accounted for based in company's policy.
Correct answers: The expected loss shall be recognized as an expense immediately regardless of the certainty or
uncertainty of the outcome of a construction contract.
1313,
Using percentage of completion method, what is the realized gross profit (loss) for the year
2019?Required to answer. Single line text.
(0/1 Point)
Correct answers: 840,000,665,000
1414,
Which of the following shall be excluded in the contract costs of construction
contract?Required to answer. Single choice.
(1/1 Point)
Costs that relate directly to the specific contract.
Costs that are directly attributable to contract activity in general and can be allocated to the contract.
Such other costs as are specifically chargeable to the customer under the terms of the contract.
Selling costs such as advertisement expense or commissions of real estate agents or brokers.
Correct answers: Selling costs such as advertisement expense or commissions of real estate agents or brokers.
1515,
When the company changes its percentage of completion of the construction project every
year, how shall the accounting change be treated?Required to answer. Single choice.
(1/1 Point)
It shall be accounted for as an equity transaction to be adjusted in the share premium or other comprehensive
income as the case may be.
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It shall be accounted for as a change in accounting policy treated by retrospective application or with cumulative
effect in the beginning retained earnings at the date of change.
It shall be accounted for as a prior period error treated by retrospective restatement or with cumulative effect in
the beginning retained earnings at the date of discovery of error.
It shall be accounted for as a change in accounting estimate treated by prospective application to the date of
change and future date profit or loss.
Correct answers: It shall be accounted for as a change in accounting estimate treated by prospective application to the
date of change and future date profit or loss.
1616,
A construction contract in which the contractor is reimbursed for allowable or otherwise
defined costs, plus a percentage of these costs or a fixed fee.Required to answer. Single choice.
(1/1 Point)
Mixed contract
Variable contract
Fixed price contract
Cost plus contract
Correct answers: Cost plus contract
1717,
How should the balance of Progress Billings and Construction in Progress be shown at
reporting dates prior to the completion of a long-term contract?Required to answer. Single
choice.
(1/1 Point)
Progress Billings as income, Construction in Progress as inventory.
Net, as loss from construction if debit balance and income from construction if credit balance.
Progress Billings as deferred income, Construction in Progress as current asset.
Net, a current asset if debit balance and liability if credit balance.
Correct answers: Net, a current asset if debit balance and liability if credit balance.
1818,
How much is the estimated additional cost to complete the project at December 31,
2016?Required to answer. Single line text.
(1/1 Point)
Correct Answer: 680,000
1919,
A construction contract in which the contractor agrees to a fixed contract price, or a fixed rate
per unit of output, which in some cases is subject to cost escalation clauses.Required to answer.
Single choice.
(1/1 Point)
Mixed contract
Variable contract
Fixed price contract
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Cost plus contract
Correct answers: Fixed price contract
2020,
Heart, Inc. consistently uses the percentage of completion method of recognizing income.
During 2018, Heart started work on a P3,000,000 fixed price project. The accounting records
disclosed the following data for the year ended December 31, 2018: Costs incurred, P930,000;
Estimated cost to complete, P2,170,000; Progress billings, P1,100,000; Collections, P700,000.
How much is the balance of Construction in Progress account in 2018?Required to answer.
Single line text.
(1/1 Point)
Correct Answer: 830,000
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