Reference no: EM132951002
On January 1, 2016, Bunny, a real state company, entered into a contract to construct a subdivision on a piece of land it as acquired, and when construction is complete, to deliver the finished houses to their customers. The following information pertains to the said contract each customers is to sign.
Each houses costs P4,000,000 each (a total of 10 houses are to be constructed)
Construction will take 2 years to complete
Payment terms are 50% by the end of the 1st year, 25% at the end of the 2nd year and the balance will be paid after 3 months from the final turn over.
The client can transfer the contract to another, should they not feel satisfied with the house on or before the house is 50% complete.
The company incurred the following expenses for 2016
Total cost of land - P2,000,000
Estimated total construction- P25,000,000 (including the costs of common areas and light posts amounting P5,000,000
Estimated total cost of contract of the 10 houses- P40,000,000
In CY 2016, total construction cost incurred amount to P13,000,000 with all common areas already fully constructed, while fair value of the land is now, worth P3,500,000. The contract to be a multiple contract.
Problem 1: The amount included as current asset in the financial statements of Bunny related to the above information is
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