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Exercise 7-1
In 2006, Durabuilt Engineering entered into an agreement to construct an office building at a contract
price of P 50,000,000. Construction data were as follows:
2006
2007
2008
Construction Cost
P 7,500,000
P 27,000,000
P 6,300,000
Estimated Cost to complete
30,000,000
8,625,000
Progress Billings
8,000,000
36,000,000
6,000,000
Collection from clients
5, 500,000
33,000,000
11,500,000
Instruction
1. Determine the revenue, cost of revenue and gross profit to be recognized in 2006,20007,20008
using the percentage of completion method and the cost to cost method of estimating the percentage
of work completed.
2. Prepare necessary journal entries to record construction activities for each year, including the
recognized revenue, cost of revenue and gross profit.
3. For 2007, show how the details related to this construction ciontract would be disclosed on the
balance sheet and in the income statement.
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