Question: 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%,

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 adjusted upward by 10%. Cost escalations on the contract are probable as to recovery. Additional information on the contract is shown below:

2018 2019

Costs incurred to date 2,400,000 4,500,000

Estimated cost at completion 6,000,000 6,000,000

Cumulative inflation rate 18% 27%

1. Compute for the percentage of completion during the year 2018.

2. Compute for the percentage of completion during the year 2019.

3. What is the contract price in 2018?

4. What is the contract price in 2019?

5. What is the realized gross profit in 2018?

6. What is the realized gross profit in 2019?

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