Reference no: EM132843512
Question - Case 1- Nuzelt Corp. engaged in high rise construction entered into a 3 -year contract with Hoya Corp. to construct its factory building in 2019. The contract price is P6,500,000. Nuzelt uses the percentage of completion (overtime) method for financial accounting purposes. The income to be recognized is based on the proportion of costs incurred to total estimated costs of completing the contract. Presented below is the a portion of the financial statement as of Dec 31, 2019.
Statement of Financial Position Less: Contract billings 675,000
Construction in Progress 900,000
Profit in excess of billing 225,000
Accounts Receivable 270.000
Income Statement
Income before tax 225,000
1. How much is the cash collection for 2019?
2. How much is the estimated total income before tax on 2019?
Case 2 - Nuzelt Corp. engaged in high rise construction entered into a 3 -year contract with Hoya Corp. to construct its factory building in 2019. The contract price is P10,000,000. Nuzelt uses the percentage of completion (overtime) method for financial accounting purposes. Progress toward completion of the contract is measured on a cost to cost basis. The following is Nuzelt's cost estimate for the said contract.
Contract Price 10,000M
Estimated Costs 7,500
Estimated Gross Profit 2,500
Billing to date 5,250M
Costs incurred to date 3,000
Latest estimated costs 7,500
Included in the costs incurred are uninstalled materials costing P600,000.00. These costs are not considered part of the costs incurred to date.
3. What is the percentage of completion?
4. The amount of gross profit that would be reported in the contract?
5. How much is the estimated cost?
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