Question: 3 points 7. Freemont Inc. started work on a construction contract in 2015. The contract price is P40 million. However, if the cumulative inflation rate

3 points 7. Freemont Inc. started work on a construction contract

3 points 7. Freemont Inc. started work on a construction contract in 2015. The contract price is P40 million. However, if the cumulative inflation rate exceeds 10%, the contract price shall be increased by 20%. Cost escalations on the contract are probable as to recovery. The following information is presented. What is the realized gross profit for 2016? * * Costs incurred to date Estimated cost to complete Cumulative inflation rate 2015 P9,600,000 14,400,000 15% 2016 P18,000,000 6,000,000 22% A. P5,600,000 B. P8,400,000 C. P9,600,000 D. P18,000,000

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Problem 1: The ETHAN Construction company was the lowest bidder on a specialized equipment contract. The contract bid was P13,125,000 with an estimated cost to complete the project of P7,800,000. The...

Problem 3 On July 1, 2017, Dinar obtained a contract to construct a building. The building was estimated to be built at a total cost of P15,000,000 and is scheduled for completion on October 2019....

CABUGERO DEVELOPMENT COMPANY., started work on a construction contract in 2018. The contract price is P10M. However, if the cumulative inflation reaches or exceeds 25%, the contract price shall be...

ABC Co. started work on a construction contract in 20x1. The contract price is P10M. However, the contractual agreement stipulates that if the cumulative inflation reaches or exceeds 26%, the contact...

EX-3 . - NEWBEE Construction Company began operations in 2017. Construction activity for 2017 is shown below. NEWBEE uses the cost-recovery method Contract.....Contract Price........Billings Through...

Need help with cash flow or ration analysis.Choose one UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10K ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE...

complete solution Not third year Third year Contract costs incur b. Not third year Fourth year Billings per year 10,000,000 7,000,000 3,000,000 Collections 1,050,000 construction recognized in 20x2,...

Consider the variability in traffic congestion in Table 5.5.5 for northeastern and for southwestern cities. a. Compare population variability of these two groups of cities. In particular, which group...

What do Yao Ming, LeBron James, and Earl R. Dean have in common?The first two are professional basketball stars, of course, butwho?s Earl R. Dean? He happens to be the person who designedCoca-Cola?s...

An increase in the level of activity will have the following effects on unit conts for variable and fred conts: Unit Varlate Cost Remains constant Hemains constant Decreaves Increases Unit Fived Cost...

Within a continuously competitive global business environment, publicly held companies face constant pressure to generate and report positive financial results. Unfortunately, some leaders may be...

What kind of education have you had to deal with visibly upset customers? How do you not take blaming customer behavior personally?

A member of a corporations board of directors learned that her company intended to announce a stock split and increase its dividend. On the basis of this favorable information, the director bought...

A company paid a $350,000 consulting fee to an official of a foreign country. In return, the official promised to help the company obtain a contract that should produce a $10 million profit for the...