5.

Cash basis (250,000 x 25/125) 50,000

Charge basis (400,000 x 33 1/3 / 133 1/3) 100,000
Installment basis (240,000 x 50/150 80,000
Total realized gross profit 230,000

1.
2014 2015
Contract price 1,100,000 1,100,000
Less total estimated cost
(390,000 + 260,000) 650,000
(390,000 + 280,000) 670,000
Gross profit 450,000 430,000
Multiply by percentage of completion
[390,000/(390,000 + 260,000)] 60%
100%
Realized revenue to date 270,000 430,000
Less realized revenue in prior year(s) - 270,000
Realized revenue in current year 270,000 160,000

2.
Initially agreed fixed contract 800,000
Variation in the contract 100,000
Penalty (30,000)
Total contract revenue 870,000

3. a.
Contract price P 1,200,000
Less total estimated cost (590,000 + 410,000) 1,000,000
Estimated gross profit 200,000
Multiply by percentage of completion
(590,000/ 1,000,000) 59%
Realized gross profit for 2014 P 118,000

A turn-key contract is a type of construction contract where by the construction firm

will provide not only the professional services but also the manpower and the
materials needed. When completed the project will be turned over to the customer,
hence the term “turn key”.
b.
Cost incurred to date P 590,000
Profit recognized on project in progress (a) 118,000
Balance of construction in progress, Dec.31 2014 P 708,000