On January 1, 2015, Engr Inc. entered into a contract to build a large office building...

Transcribed Image Text:

On January 1, 2015, Engr Inc. entered into a contract to build a large office building for CPA Inc. for a total contract price of P5,000,000. CPA Inc. will make annual payments to Engr Inc. but the amount of these payments cannot exceed the direct costs incurred by Engr Inc. The construction contract provided CPA inc. with a final inspection right to ensure compliance with the contract terms prior to accepting the completed project. It had been the accounting policy of Engr Inc. to use percentage of completion method to compute construction revenue and gross profit. On January 1, 2017, Engr Inc. implemented an accounting change from percentage of completion method to zero profit or cost recovery method. The following data were provided by Engr. Inc. for the years ended December 31, 2015, 2016 and 2017: Costs incurred each year Estimated cost to complete at year-end 2015 1,450,000 2016 2,600,000 2017 600,000 3,150,000 400,000 Progress billings each year 400,000 2,000,000 2,600,000 Progress payment received each year 275,000 2,100,000 2,625,000 Corporate income tax 30% 30% 30% The costs incurred for each year are inclusive of the following actual marketing expense and general administrative costs which are not reimbursable under the construction contracts: Marketing expense General administrative each year 2015 2016 70,000 200,000 2017 120,000 30,000 150,000 80,000 9. What is the net income to be reported by Engr Inc. for the year ended December 31, 2015? a. 50,000 b. 150,000 c. 35,000 d. 105,000 10. What is the net income to be reported by Engr Inc. for the year ended December 31, 2016? a. 150,000 b. 280,000 c. 100,000 d. 250,000 11. What is the construction in progress as of December 31, 2015? a. 1,600,000 b. 1,500,000 C. 1,450,000 d. 1,550,000 12. What is the construction in progress net of progress billings as of December 31, 2016? a. 2,100,000 b. 2,550,000 c. (1,950,000) d. (2,000,000) On January 1, 2015, Engr Inc. entered into a contract to build a large office building for CPA Inc. for a total contract price of P5,000,000. CPA Inc. will make annual payments to Engr Inc. but the amount of these payments cannot exceed the direct costs incurred by Engr Inc. The construction contract provided CPA inc. with a final inspection right to ensure compliance with the contract terms prior to accepting the completed project. It had been the accounting policy of Engr Inc. to use percentage of completion method to compute construction revenue and gross profit. On January 1, 2017, Engr Inc. implemented an accounting change from percentage of completion method to zero profit or cost recovery method. The following data were provided by Engr. Inc. for the years ended December 31, 2015, 2016 and 2017: Costs incurred each year Estimated cost to complete at year-end 2015 1,450,000 2016 2,600,000 2017 600,000 3,150,000 400,000 Progress billings each year 400,000 2,000,000 2,600,000 Progress payment received each year 275,000 2,100,000 2,625,000 Corporate income tax 30% 30% 30% The costs incurred for each year are inclusive of the following actual marketing expense and general administrative costs which are not reimbursable under the construction contracts: Marketing expense General administrative each year 2015 2016 70,000 200,000 2017 120,000 30,000 150,000 80,000 9. What is the net income to be reported by Engr Inc. for the year ended December 31, 2015? a. 50,000 b. 150,000 c. 35,000 d. 105,000 10. What is the net income to be reported by Engr Inc. for the year ended December 31, 2016? a. 150,000 b. 280,000 c. 100,000 d. 250,000 11. What is the construction in progress as of December 31, 2015? a. 1,600,000 b. 1,500,000 C. 1,450,000 d. 1,550,000 12. What is the construction in progress net of progress billings as of December 31, 2016? a. 2,100,000 b. 2,550,000 c. (1,950,000) d. (2,000,000)