Marle Construction enters into a contract with a customer to build a warehouse for P850,000 on March

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Question:

Marle Construction enters into a contract with a customer to build a warehouse for P850,000 on March 30, 20x5 with a performance bonus of P50,000 if the building is completed by July 31, 20x5. The bonus is reduced by P10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience estimates the following completion outcomes:

Completed by Probability

July 31, 20x5 65%

August 7, 20x5 25%

August 14, 20x55%

August 21, 20x55%

The transaction price for this contract is?

10. AJD Builders Construction Company enters into a contract with a customer to build a 50 kilometers road for P100,000,000, with a performance bonus of P60,000,000 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 10% per week for every week beyond the agreed-upon completion date. The contract requirements are similar to contracts that AJD Builders has performed previously, and management believes that such experience is predictive for this contract. Management estimates that there is a 60% probability that the contract will be completed by the agreed-upon completion date, a 30% probability that it will be completed one week late, and only a 10% probability that it will be completed two weeks late. Determine the probability-weighted amount for the management to determine the transaction price.

16. At December 31, 20x5, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to P14,400,000 due to unanticipated price increases. At December 31, 20x4, Seasons estimated it was 30% complete. What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 20x5?

17. At December 31, Ox5, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to P14,400,000 due to unanticipated price increases. What is reported in the balance sheet at December 31, 20x5 for Seasons as the difference between the Construction in Process and the Billings on Construction in Process accounts, and is it a debit or a credit?

18. Seasons Construction completes the remaining 25% of the building construction on December 31, 20x6, as scheduled. At that time the total costs of construction are P15,000,000. At December 31, 20x5, the estimates were 75% complete and total costs of P14,400,000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that Seasons will recognize for the year ended December 31, 20x6?