Freemont Inc. started work on a construction contract in 2015. The contract price is P40 million. However, if the cumulative inflation rate exceeds 20%, the contract price shall be increased by 10%. Cost escalations on the contract are probable as to recovery. The following information is presented. What is the realized gross profit for 2016? * 2015 2016 P9, 600,000 Costs incurred to date P18,000,000 Estimated cost to complete 14,400,000 6,000,000 Cumulative inflation rate 154 22% P6,400,000 P5,600,000 P8,600,000 P15,000,000 DM. Inc. worked on a P10,500,000 contract in 2016 to construct an office 3 points

Freemont Inc. started work on a construction contract in 2015. The contract price is P40 million. However, if the cumulative inflation rate exceeds 20%, the contract price shall be increased by 10%. Cost escalations on the contract are probable as to recovery. The following information is presented. What is the realized gross profit for 2016? * 2015 2016 P9, 600,000 Costs incurred to date P18,000,000 Estimated cost to complete 14,400,000 6,000,000 Cumulative inflation rate 154 22% P6,400,000 P5,600,000 P8,600,000 P15,000,000 DM. Inc. worked on a P10,500,000 contract in 2016 to construct an office 3 points

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On 31 December 2017, PC sold used equipment with carrying amount of P2,000,000 in exchange for a non-interest bearing note of P5,000,000 requiring ten annual payments of P500,000. The first payment was mad on 31 December 2018. The market interest for similar note was 12%. (use 2 decimal places for PV factors) What amount should be recognized as interest income for 2018? What is the gain on sale of equipment to be recognized in 2017?
In August 2020, Atlantic Corp, commits to selling 100 of its merchandise to Boy Co. for P30,000 (P300 per product). The merchandise is to be delivered to Boy over the next 6 months. After 60 mierchandises were delivered, the contract is modified and Commonio promises to deliver 80 more products for an additional P21,600 (P270 per station). At year-end, Atlantic delivered an additional 90 products. All sales are cash on delivery Assume that the additional terms anpective modification to the original contract. How much revenue will be recognized on the contract for the year 2020?
On October 1, 2015, Bea company entered into a, P10,400,000 purchase commitment for a supply of a special product on Mar. 31, 2016. On December 31, 2015, the market value of this material had fallen to P10,000,000. On Mar. 31, 2016, the market value of the purchase commitment is P10,500,000. What is the gain/(loss) on purchase commitment that should be recognized on Mar. 31, 2016?
During 2015, AD Company signed a non-cancelable contract with BARD Company to purchase 5,000, 50-kilos sacks of rice at P1,700 per sack with delivery to be made on June 1, 2020. On December 31, 2015, the price of rice had fallen to P1,680 per sack. On June 1, 2016, the price per sack of rice has further decrease to P1,540. In A’s December 31,2016 profit and loss, how much is reported as loss on purchase commitments?
In August 2020, Atlantic Corp, commits to selling 100 of its merchandise to Boy Co. for P30,000 (P300 per product). The merchandise is to be delivered to Boy over the next 6 months. After 60 mierchandises were delivered, the contract is modified and Commonio promises to deliver 80 more products for an additional P21,600 (P270 per station). At year-end, Atlantic delivered an additional 90 products. All sales are cash on delivery How much revenue will be recognized on the contract for the year 2020?
On December 2, 2020, Moon Corp. entered into a non-cancelable purchase contract to buy 10,000 ounces of diamonds on February 12, 2021 at a price of P310 per ounce. At year-end of 2020, the market value of diamonds fell down to P270 per ounce. On February 12, 2021, the market price of diamonds skyrocketed to P320 per ounce. What is the amount of gain on recovery of Moon Corp. recognize on February 12, 2021? A. P400,000 B. No gain to be recognized C. P500,000 D. P100,000
On 1 October 2017, Bush Co. borrowed $6 million for a term of one year, exclusively to financethe construction of a new piece of production equipment. The interest rate on the loan is 6% andis payable on maturity of the loan. The construction commenced on 1 November 2017 but noconstruction took place between 1 December 2017 and 31 January 2018 due to employees takingindustrial action. The asset was available for use on 30 September 2018 having a constructioncost of $6 million.What is the carrying amount of the production equipment in Bush Co’s statement of financialposition as at 30 September 2018?A $5,016,000B $6,270,000C $6,330,000D $6,360,00
Based on past experience, Leickner Company expects to purchase raw materials from a foreign supplier at a cost of 1,000,000 marks on March 15, 2018. To hedge this forecasted transaction, the company acquires a three-month call option to purchase 1,000,000 marks on December 15, 2017. Leickner selects a strike price of $0.58 per mark, paying a premium of $0.005 per unit, when the spot rate is $0.58. The spot rate increases to $0.584 at December 31, 2017, causing the fair value of the option to increase to $8,000. By March 15, 2018, when the raw materials are purchased, the spot rate has climbed to $0.59, resulting in a fair value for the option of $10,000.a. Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials, assuming that December 31 is Leickner’s year-end and that the raw materials are included in the cost of goods sold in 2018.b. What is the overall impact on net income over the two accounting periods?c. What is the net…
Suneilert Construction Company had a contract starting April 2021, to construct a P15,000,000 building that is expected to be completed in September 2022, at an estimated cost of P13,750,000. At the end of 2021, the costs to date were P6,325,000 and the estimated total costs to complete had not changed. The progress billings during 2021 were P3,000,000 and the cash collected during 2021 was P2,000,000. Suneilert uses the percentage-of-completion method.For the year ended December 31, 2021, Suneilert would recognize gross profit on the building of?
Moonlight Construction Company had a contract starting April 2020, to construct a P9,000,000 building that is expected to be completed in September 2022, at an estimated cost of P8,250,000. At the end of 2020, the costs to date were P3,795,000 and the estimated total costs to complete had not changed. The progress billings during 2020 were P1,800,000 and the cash collected during 2020 was 1,200,000. At December 31, 2020 Moonlight would report Construction in Process in the amount of:
The company manager targets to reduce the current ratio in the year (2020) by 33% from the previous year (2019), this requiring to downsize the amount of the total current asset. To what level can the manager reduce the total current asset to achieve this target at (2020)? Data of 2019 Total Asset Turnover 2 Times Net Fixed Asset 400 (Thousand OMR) Total Liabilities 400 (Thousand OMR) Sales 2000 (Thousand OMR) Quick Ratio 1.5 Times Accounts Receivable 150 (Thousand OMR) Long-term Liabilities 200 (Thousand OMR)
A company expects to retire an existing machine at the end of 2024 and will replace it with a new machine for the same task at an estimated cost of P60,000. The old machine is expected to be sold for P5,000 when it is replaced. To provide for the replacement, the company intends to deposit the following amounts in an account earning interest at 8% compounded quarterly: P20,000 at the end of 2021 P15,000 at the end of 2022 P10,000 at the end of 2023 What additional amount is needed at the end of 2024 to purchase the new machine? Draw the CFD.