ANSWER KEY

Prob. 1
MM Builders which uses POC method presented the ff. data for the 4 projects:
Project A B C D
CP 29,000,000 34,000,000 17,000,000 20,000,000
Cost incurred – 2022 16,800,000 14,400,000 3,200,000 -
Est. cost to complete – 2022 11,200,000 17,600,000 9,600,000 -
Cost incurred – 2023 9,600,000 6,800,000 8,630,000 5,600,000
Est. cost to complete – 2023 - 13,000,000 1,170,000 10,040,000
Opex for 2022 and 2023 were 1,200,000 for each year.
Net income for the 2 year ended Dec. 31, 2022 600+900+1,050 – 1,200 = 1,350
and Dec. 31, 2023 2,000+(1,700)+2,590+1,400-1,200= 3,090

Prob. 2
OMECO was tapped to build a private electric plants in the towns of San Jose and Rizal. The ff. information related to this
projects during 2026. Any cost incurred are expected to be recoverable.
San Jose Rizal
CP 10,500,000 7,500,000
Cost incurred to date 6,000,000 7,000,000
Est. cost to complete 3,000,000 1,000,000
Billings during the year 7,000,000 1,000,000
Collections during the year 6,000,000 1,000,000
Gross profit or loss should the company report in its 2026 income statement using:
POC 500,000 ZPM (500,000)

Prob. 3
I Knew You Were Rubble Inc. entered into a long-term construction contract to construct a sophisticated flood drainage
system to prevent people from drowning, for an initial contract price of P20,000,000. During 2024, the contract price
increased due to the change in the project design. The following data were available:

2022 2023 2024

Cumulative costs incurred to yearend 2,000,000 ? 21,600,000
RGP for the year ? 700,000 (3,200,000)
Percentage of completion as of yearend 12.5% 60% 90%

How much is the cost of construction to be recognized in the company’s income statement for the year ended
December 31, 2024? 11,000,000
How much is the construction revenue to be recognized in the company’s income statement for the year ended
December 31, 2024? 7,800,000

Prob. 4
MM entered into a construction agreement in 2025 for a contract price of 9.6M. at the beginning of 2026, a change
order increase the initial contract price by 480,000. MM uses POC in recognition of revenue. In relation to the project,
the ff. data are obtained:
2025 2026
Cost incurred to date 4,920,000 8,640,000
Est. costs to complete 4,920,000 2,160,000
Billings made 5,280,000 8,520,000
Collection made 4,380,000 7,500,000
RGP/(loss) should MM recognize in 2026 (480,000)
EXAMPLE PROBLEM (LTCC QUIZ)
Prob. 1
MM Builders which uses POC method presented the ff. data for the 4 projects:
Project A B C D
CP 29,000,000 34,000,000 17,000,000 20,000,000
Cost incurred – 2022 16,800,000 14,400,000 3,200,000 -
Est. cost to complete – 2022 11,200,000 17,600,000 9,600,000 -
Cost incurred – 2023 9,600,000 6,800,000 8,630,000 5,600,000
Est. cost to complete – 2023 - 13,000,000 1,170,000 10,040,000
Opex for 2022 and 2023 were 1,200,000 for each year.
Net income for the 2 year ended Dec. 31, 2022 _______________
and Dec. 31, 2023 _______________

Prob. 2
OMECO was tapped to build a private electric plants in the towns of San Jose and Rizal. The ff. information related to this
projects during 2026. Any cost incurred are expected to be recoverable.
San Jose Rizal
CP 10,500,000 7,500,000
Cost incurred to date 6,000,000 7,000,000
Est. cost to complete 3,000,000 1,000,000
Billings during the year 7,000,000 1,000,000
Collections during the year 6,000,000 1,000,000
Gross profit or loss should the company report in its 2026 income statement using:
POC _______________ ZPM _______________

Prob. 3
I Knew You Were Rubble Inc. entered into a long-term construction contract to construct a sophisticated flood drainage
system to prevent people from drowning, for an initial contract price of P20,000,000. During 2024, the contract price
increased due to the change in the project design. The following data were available:

2022 2023 2024

Cumulative costs incurred to yearend 2,000,000 ? 21,600,000
RGP for the year ? 700,000 (3,200,000)
Percentage of completion as of yearend 12.5% 60% 90%

How much is the cost of construction to be recognized in the company’s income statement for the year ended
December 31, 2024? _______________
How much is the construction revenue to be recognized in the company’s income statement for the year ended
December 31, 2024? _______________

Prob. 4
MM entered into a construction agreement in 2025 for a contract price of 9.6M. at the beginning of 2026, a change
order increase the initial contract price by 480,000. MM uses POC in recognition of revenue. In relation to the project,
the ff. data are obtained:
2025 2026
Cost incurred to date 4,920,000 8,640,000
Est. costs to complete 4,920,000 2,160,000
Billings made 5,280,000 8,520,000
Collection made 4,380,000 7,500,000
RGP/(loss) should MM recognize in 2026 _______________
Prob.1
MM Construction Company was awarded a contract to construct a sewage system for Maynilad for 32,500,000.
The original estimate of the cost to complete the project was 30,000,000. The contract provides for periodic progress
billings. A final billing equal to 25% of the CP is to be made upon final inspection and acceptance by Maynilad. The
record was follows:
Date Cost incurred to date Est. cost to complete
12/31/2021 10,750,000 16,125,000
12/31/2022 26,250,000 7,500,000
8/15/2023 34,250,000
The construction was inspected on Aug. 15, 2021, Jan. 15, 2022, and Oct. 1, 2022, and PB equal to 25% of the CP were
made on each of these dates. The system was completed, and final inspection and acceptance took place on Aug. 31,
2023. CIP net of PB in 2022 ____________________________

Prob. 2
MM Cons. Company began operation on Jan. 2, 2023. During the year, the company entered into a contract with
TT to construct a manufacturing facility. At that time, MM estimated that it would take 5 years to complete the facility at
a total cost of 18,000,000. The total CP for the construction is 25,000,000. During the year, the company incurred
4,400,000 in construction cost related to the project. The estimated cost to complete the contract is 15,600,000. TT was
billed and paid 30% of the CP. Using POC, how much is the CIP or PB ____________________________

Prob. 3
MM Cons. Inc. entered into a construction contract in 2022 that called for a contract price of 9,600,000. At the
beginning of 2023, a change order increased the initial CP by 480,000. The company uses POC method for completing
the project, the ff. data is available:
2022 2023
Cost incurred to date 4,920,000 8,640,000
Est. cost to complete 4,920,000 2,160,000
RGP/(RGL) to be recognized for 2022 _____________________ and 2023 ______________________

Prob. 4
MM works on a 70 million contract in 2023 to construct a mall. During 2023, MM uses the POC method of
revenue recognition. At Dec. 31, 2023, account balances were:
CIP 24,500,000
AR 2,400,000
Contract billings 12,000,000
Est. cost to complete 31,850,000
Actual cost incurred for 2023 _______________________

Prob. 5
In 2021, MM Builders agreed to construct a commercial building at a price of 10,000,000. MM uses POC method
of recognizing revenue from LTC projects. Data were as follows:
2021 2022 2023
Cost incurred each year 2,800,000 3,200,000 1,850,000
Est. cost to complete 5,200,000 2,000,000 -
Billings to date 1,500,000 4,000,000 10,000,000
Collections 1,200,000 3,200,000 9,400,000
RGP in 2022 _____________________
Balance of CIP net of PB ____________________
If ZPM, balance of CIP over PB _______________________
Prob. 6
MM recognized RGP of 315,000 on its LTC projects that has accumulated cost of 612,500 for the year. To finish
the project, MM estimates that it has to incur additional cost of 1,225,000. Billings were made 40% of the CP. What was
the balance of CIP account net of PB? ______________________

Prob. 7 – On March 1, 2020, MDM Construction was contracted to build an office building for a total contract price of
3,650,000. Details below:
2020 2021 2022
Contract cost incurred 700,000 1,860,000 600,000
Estimated cost to complete 2,100,000 640,000 -

Compute the ff. for 2020 to 2022

A. Revenue
B. CIP
C. RGP
Assuming estimates are:
A. Reliable - cost to cost (POC)
B. Not Reliable – recovery method (ZPM)

Prob. 8 – On January 1, 2020, MDM Construction Corp. begun constructing a 4,200,000 apartment building. The ff. are
the relevant information provided by the corporation. MDM uses POC method. For the year ended Dec. 31, 2021, MDM
billed its client an additional 55% of the contract price.
2020 2021 2022
CIP 882,000 ? ?
Estimated cost to complete ? ? -
Cost incurred 850,500 1,800,000 1,200,000

In 2020, excess of CIP over progress billings – 168,000 current liability

In 2021, excess of CIP over progress billings – 661,500 current liability

How much is the estimated remaining cost in 2020?

How much is the RGP/(RGL) in 2021?
How much is the balance of CIP in 2021?