Reference no: EM132945577
Diamond Builders uses the percentage of completion method in accounting for its long-term contracts. During 2019, Diamond Builders started work on a P10M fixed price project. As of December 31, 2019 costs incurred amounts to P3,175,000. This amount includes P200,000 costs of materials stored in the warehouse intended for the next stage of construction sometime 1 quarter of 2020. The engineer's estimate of construction costs at completion is P8.5M. Diamond billed the client 30% of contract price and collected the same amount.
In 2020, Diamond Builders incurred P3,575,000 more and billed the customer P3.3M At the end of the year, the estimated cost to complete is still P2,250,000.
Problem 1. On Dec. 31, 2019, the contract asset account has a ledger balance of
A. 3,175,000
B. 3,500,000
C. 2,975,000
D. 3,736,000
Problem 2. In 2020, the contract revenue and contract costs is
A. P7,500,000, P6,750,000
B. P4,000,000, P3,775,000
C. P4,000,000, P3,575,000
D. Not Given