The allotment received for Co is 20M. DOH constructed a new building at a cost of 18M.

The contractor was awarded and post a performance bond in cash. Advances to the contractor was granted equivalent to 15% of total cost. The agency received its first billing at 50% completion a month after the work started. The final billing was received 2 months after. COA engineer was requested to inspect the construction and noted a 10 days delay of work and ratification of the CR was recommended that estimated to cost at 40,000. The contractor was charge with liquidating damages of 50,000. The building was finally completed and turnedover to DOH. The performance bond and retention fees were returned including remittances of BIR taxes. REQUIREMENT: 1. Differentiate performance bond and retention fees. Performance Bond- makes sure the contractors comply with the obligation Retention Fees(10%)- takes charge for correction 2. What are the forms/types of performance bond? Managers Check/Cash 5% TC Bank Guarantee 10% TC Surety Bond 30% TC 3. Why is the government extending advances to the contractor? To finance the start of the construction 4. Journalize the transaction DR 1 Obligate-RAOCO- 18,000,000-Building Construction 2 Cash, CO PB Payable
Receipt of Performance Bond

CR

900,000 900,000

3 Due from National Treasury Cash, CO 4 Advances to Contractor Cash-National Treasury, MDS 5 Construction In Progress Accounts Payable Advances to Contractor

900,000 900,000 2,700,000 2,700,000 9,000,000 7,650,000 1,350,000

6 Accounts Payable Due to BIR Guarantee Deposit Payable Cash-National Treasury, MDS rates: for construction only VAT 9M x 10/11 x 8.5%= EVAT 9M x 2% = P 7 Construction In Progress-AA Accounts Payable Advances to Contractor 8 Accounts Payable Due to BIR Guarantee Deposit Payable Cash-National Treasury, MDS rates: for construction only VAT 8.95M x 10/11 x 8.5%= EVAT 8.95M x 2% = P 9 Cash-National Treasury, MDS Due from National Treasury 10 Performance Bond Payable Cash-National Treasury, MDS 11 Adjust the RAOCO-negative entry of the obligation incurred column- P50,000-representing Liquidating Damages 12 Guarantee Deposit Payable SING 13 Guarantee Deposit Payable Cash-National Treasury, MDS 14 Building Construction In Progress-AA

7,650,000 875,454 900,000 5,874,546

695,454 180,000 875,454 9,000,000 7,650,000 1,350,000 7,650,000 875,454 900,000 5,874,546

691,591 179,000 870,591 900,000 900,000 900,000 900,000

Memo Entry Only

40,000 40,000 1,755,000 1,755,000 17,950 17,950