Name:_________________________________________ Date:______________________ Score:____________

AFAR
Revenue From Contracts With Customers
and Long-Term Construction Contracts
Mock Board Training Program 2024-2025

THEORIES (35 Items)

1. Contract revenue in construction contract comprises.

a. The initial amount of revenue agreed in the contract.
b. Variation in contract work, claim and incentive payment.
c. The initial amount of revenue agreed in the contract, variation in contract work, claim and incentive payment.
d. The initial amount of revenue agreed in the contract and progress billings.
2. Statement 1: The consignee may credit sales revenue only upon transfer of control relating to merchandise held on
consignment in some circumstances.
Statement 2: Freight-in and cartage cost related to returned goods previously held on consignment affects the computation of
net income of the consignor.
a. Both statements are true
b. Both statements are false
c. Statement 1 is true, statement 2 is false
d. Statement 1 is false, statement 3 is true
3. Which of the following is false regarding contract revenue by a contractor?
a. Variation in contract work as instructed by the customer regarding the scope of work to be performed by the contractor
decreases the contract price.
b. Claims that the contractor may seek to collect from the customer for customer caused delays or errors in specification or
design increased the contract price.
c. Incentive payments to be paid to the contractor if specified performance standards are met or exceeded or for early
completion of the contract increases the contract price.
d. A penalty decreases the contract price.
4. Using the zero profit method, the contract revenue for the year is:
a. Zero
b. Equal to the cost incurred recognized during the year
c. Equal to the cost incurred recognized during the year that are probable of recovery
d. None of the choice
5. The excess of the Construction in Progress over Progress Billings is treated as:
a. Current asset
b. Current liability
c. Other asset
d. Non-current asset
6. It is an entity’s right to consideration in exchange for goods and services that the entity has transferred to a customer when
that right is conditioned on something other than passage of time.
a. Contract receivable
b. Contract asset
c. Construction in progress
d. Contract liability
7. The entity will combine two or more contracts entered at or near. At the same time with the same customer into a single
contract, except: a.
a. The contractor has submitted separate proposals on the separate component of the project.
b. The contract are negotiated as a package with a single commercial objective
c. The amount of consideration to be paid in one contract depends on the price or performance of the other contract.
d. The goods or services promised in the contracts (or some goods or services promised in each of the contracts) are a
single performance obligation.
8. A company uses the percentage of completion method to account for a three-year construction contract. Which of the
following would be used in the calculation of the income recognized in the first year?
a. Collection of progress billings
b. Mobilization fee
c. Progress billings
d. Cost Incurred
9. All of the following could be a valid reasons why the expected revenue from a fixed price construction contract has increased
from the original contract price, except
a. The contractor has incurred additional costs due to errors made by its employees
b. The contractor has agreed variations to the contract with the client.
c. The costs in the contract have increased and the contract includes cost escalation clause.
d. The contractor would receive an incentive payment if work continues ahead of schedule and it is probable that specified
performance standards are met or exceeded.
10. In accounting for a long-term construction contract for which there is a projected profit, the balance in the Construction in
Progress account at the end of the first year of work using the percentage of completion method would be
a. Lower than the zero profit method
b. Higher than zero profit method
c. The same as zero profit method
d. Zero
11. The following costs shall be capitalized as part of construction in progress or contract costs, except
a. Costs of hiring and moving of plant and equipment to and from the contract site.
b. Systematically, rationally and consistently allocated construction overheads and borrowing costs.
c. Costs that are specifically chargeable to the customer under the terms of the contract may include some general
administration costs and development costs for which reimbursement is specified in the terms of the contract.
d. General and research and development costs for which reimbursement is not specified in the contract.
12. Which of the following costs shall be excluded in the contract costs of construction contract?
a. Costs that relate directly to the specific contract.
b. Costs that are directly attributable to contract activity in general and can be allocated to the contract.
c. Such other costs as are specifically chargeable to the customer under the terms of the contract.
d. Selling costs such as advertisement expense or commissions of real estate agents or brokers.
13. The percentage of completion must be used when certain condition exists. Which of the following is not one of those
necessary conditions?
a. Total contract revenue can be measured reliably.
b. The buyer can be expected to satisfy some of the obligation under the contract.
c. It is probable that the economic benefits associated with the contract will flow.
d. Estimates of progress toward completion, revenues and costs can be estimated reliably.
14. A contract is wholly unperformed if:
a. The entity is not yet entitled to receive any amount of consideration in exchange for promised goods or services
b. The entity has not yet received any consideration in exchange for promised goods or services
c. The entity has not yet transferred any promised goods or services to the customer
d. All of the above
15. The noncash consideration is:
a. Recorded based on the fair value of equivalent goods or services
b. Recorded based of the fair value goods or services received
c. Recorded based of the original cost goods or services paid by the customer
d. Recorded based on the fair value goods or services given up.
16. A contract with a customer will be within the scope of IFRS 15 if all the following conditions are met:
a. The contract has been approved by the parties to the contract and each party’s rights in relation to the goods or services to be
transferred can be identified.
b. The payment terms for the goods or services to be transferred can be identified and the contract has commercial substance.
c. It is probable that the consideration to which the entity is entitled to in exchange for the goods or services will be collected.
d. All of the above

17. A good or service is distinct if the following criteria is/are met?

a. The customer can benefit from the good or service on its own or in conjunction with other readily available resources
b. The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract
c. Both A and B
d. None of the above
18. If a stand-alone selling price is not directly observable, the entity will need to estimate it, using what method?
a. Adjusted market assessment approach
b. Expected cost plus a margin approach
c. Residual approach
d. All of the above
19. This is defined as the ability to direct the use of and obtain substantially all of the remaining benefits from the asset
a. Control of an asset
b. Usage of an asset
c. Liability
d. Management
20. An entity recognizes revenue over time if this criteria is met:
a. The customer simultaneously receives and consumes all of the benefits provided by the entity as the entity performs
b. The entity’s performance creates or enhances an asset that the customer controls as the asset is created
c. The entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to
payment for performance completed to date
d. All of the above
21. An entity shall recognize revenue to depict the transfer of promised goods or services to customers in the __________ amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services.
a. Net
b. Residual
c. Gross
d. Cumulative
22. A company must account for a contract modification as a new contract if:
a. Goods or services are interdependent on each other
b. The promised goods or services are distinct
c. The company has the right to receive consideration equal to standalone price
d. Goods or services are distinct and company has right to receive the standalone price
23. The amount of revenue recognized under IFRS 15 is the:
a. Historical cost
b. Transaction price
c. Settlement price
d. Face value
24. The transaction price for multiple performance obligations should be allocated:
a. Based on selling price from the company’s competitors
b. Based on what the company could sell the goods for on a stand-alone basis
c. Based on forecasted cost of satisfying performance obligation
d. Based on total transaction price less residual value
25. Revenue recognition under PFRS 15 is based on
a. Transfer of risk and rewards of ownership
b. Transfer of control
c. Transfer of title
d. Payment of consideration
26. Which of the following is an indicator that revenue for a service should be recognized over time?
a. The seller is enhancing an asset that the buyer controls as the service is performed.
b. The seller is providing continuous effort to the buyer.
c. The seller can estimate the percent of work completed.
d. The sales price is fixed and determinable.
27. According to IFRS 15, the asset is transferred to a customer
a. When the asset is physically delivered to the customer’s premises
b. On the day specified by a contract with the customer
c. When the customer obtains control over it
d. On the day when the entity satisfies all performance obligations, specified in the contract with the customer

28. Revenue from sale of goods is recognized when

a. The goods have been delivered to the customer
b. The cash has been received for the sale of goods
c. The significant risks and rewards of ownership have been transferred to the buyer
d. Sale order has been received
29. Under IFRS 15, when shall the consignor recognize revenue from consignment sales arrangement?
a. From the moment the consignee sells the goods to final consumers
b. From the moment the consignor delivers the goods to the consignee
c. From the moment of collection by the consignee of the proceeds of the sale from final consumers
d. From the moment of remittance by the consignee to the consignor of the collection from final consumers
30. Generally, under IFRS 15, revenue is recognized as control is passed and the customer is obtaining benefits from the assets. Below are
the indications that the customer obtained benefit directly or indirectly, except:
a. Using the asset to produce goods or provide services
b. Pledging the asset to secure loan
c. Holding the asset
d. Using the asset to enhance the value of other assets
e. Inspecting the asset for possible acquisition
31. A good or service that is promised to a customer is distinct if
a. The customer can benefit from the good or service on its own
b. The customer can benefit from the good or service together with other resources that are readily available to the customer
c. The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract
d. All of the above
32. In general, contract costs incurred in relation to a contract with a customer must be:
a. Recognized as an asset if they relate to a performance obligation which has not yet been satisfied
b. Recognized as an asset if they relate to a performance obligation which has been satisfied
c. Recognized as an expense when incurred
d. Recognized as an asset if they are not expected to be recovered
33. A contract is wholly unperformed if:
a. The entity has not yet transferred any promised goods or services to the customer
b. The entity has not yet received any consideration in exchange for promised goods or services
c. The entity has not yet entitled to receive any consideration in exchange for promised goods or services
d. All of the above
34. A contract modification is always treated as a separate contract for the purposes of IFRS 15
a. True
b. False
35. A contract modification is the change in the price and/or scope that is approved by the parties to the contract in a written form only.
a. True
b. False

PROBLEMS (15 Items)

Problem 1: On July 1, 2026, Sarita Construction Corporation contracted to build an office building for Elly Inc. for a total contract price of 975,000.
2026 2027 2028
Contract cost incurred to date 75,000 600,000 1,050,000
Estimated cost to complete 675,000 400,000 -
Billings to Elly Inc. 150,000 550,000 275,000

36. Under the percentage of completion method, how much is the Construction in Progress on December 31, 2027?
a. 597,500
b. 685,000
c. 672,500
d. 575,000
37. Under the Zero Profit method, how much is the contract asset (liability) on December 31, 2027?
a. 50,000 asset
b. 125,000 asset
c. 50,000 liability
d. 125,000 liability

38. Under the percentage of completion method, how much is the realized gross profit/(loss) at December 31, 2028?
a. (72,500)
b. (75,000)
c. (50,000)
d. (100,000)

Problem 2: On January 1, 2024, AAA Corp. accepted a long-term construction project to build a condominium at a fixed contract price of
P100,000,000. The following data are provided by the accountant and project manager concerning the construction costs for the two years of
construction:

12/31/2024 12/31/2025
Cumulative costs incurred as of the end of the P40,000,000 P50,000,000
year
Estimated cost to complete at the end of the year P90,000,000 P60,000,000

39.