Calculate the value of current asset

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Question - On January 1, 2018, RONNA MIE Company, a company entered into a contract to construct a building on a land it has acquired and, when construction is complete, to deliver the property to the customer. The following information pertains to the contract:

Total cost of land -P2M; estimated total cost of construction - P10M; estimated total cost of contract -P12M; agreed purchase price is P15M. In 2018, the total of construction cost incurred and fair value of land is P6M. By that time, the company estimates a reasonable profit of P1M in the sale of its land. Records also disclose a Progress Billing in the amount of P2.2M.

The contract is considered a multiple element contract.

1) How much is the gross prof it recognized by RONNA MIE on its 2018 Financial Statements?

a. P2,000,000

b. P600,000

c. P1,500,000

d. 900,000

2) Using information in previous number alone, calculate the value of current asset in RONNA MIE's 2018 Financial Statements.

a. P3,400,000

b. P5,600,000

c. P 1,400,000

d. P4,400,000

Reference no: EM133034022

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