The terms of the arrangement require the operator to: Construct a road-completing construction within 2 years Maintain and operate the road for 3 years Resurface the road when the original surface has deteriorated below a specified condition. The operator estimates that it will have to undertake the resurfacing at the end of Year 4. The government grants the operator the right to collect toll fees from road users. The contract ends in Year 5. The operator makes the following estimates:
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- The terms of the arrangement require the operator to: a. Construct a road-completing construction within two years b. Maintain and operate the road for three years c. Resurface the road when the original surface has deteriorated below a specified condition. The operator estimates that it will have to undertake the resurfacing at the end of year 4. d. The government grants the operator the right to collect toll fees from road users and in addition, guarantees a minimum amount of P100 and interest at a specified rate of 24.42% to reflect the timing of cash receipts. e. The contract ends in year 5. The operator makes the following estimates: Year Contract Cost Stand-alone selling price Construction Services 1 50 Forecast cost +20% 2 50 Forecast cost +20% Operation Services Road resurfacing 3-5 20 N/A 4 10 N/A Compute the allocated amount for the intangible asset.The terms of the arrangement require the operator to: a. Construct a road-completing construction within two years b. Maintain and operate the road for three years c. Resurface the road at the end of Year 4 d. The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public e. The road is turn-over to the government at the end of Year 5 f. The operators determine that the implied interest rate is 24.42%. g. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Year Contract Cost Stand-alone selling price Construction Services 1 70 Forecast cost +10% 2 80 Forecast cost +20% Operation Services Road resurfacing 3-5 25 Forecast cost +30% 4 15 Forecast cost +10% Compute for the profit for year 2.A contractor enters into a contract for the expansion of an existing two-lane highway to a three-lane highway. The contract price is P65 million plus a P5 million award fee if the expansion is complete before the holiday travel season. The contract is expected to take one year to complete. The contractor has a long history of performing this type of highway work The award fee is binary; that is, if the job is finished before the holiday travel season, the contractor receives the full award fee. The contractor does not receive any award fee if the highway is not finished before the holiday season. The contractor believes, based on its significant past experience, that it is 95 percent likely that the contract will be completed in advance of the holiday travel season. 1. How much should the contractor account for the award fee? 2. How many distinct performance obligations are in the contract? Group of answer choices a.2 b. 3 c.4 d. 1
- The terms of the arrangement require the operator to: Construct a road-completing construction within 2 years Maintain and operate the road for 3 years Resurface the road at the end of Year 4 The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public The road is turnover to the government at the end of Year 5 The operators determine that the implied interest rate is 24.42% The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: P75 in each Years of 3 and 4 and P40 in Year 5. The effective interest rate is 25.77% The operator makes the following estimates: YEAR CONSTRUCTION COST STAND-ALONE SELLING PRICE Forecast cost +10% Construction Services 1 70 80 Forecast cost +20% Operation Services Road Resurfacing Compute for the profit for Year 2. 3-5 4 25 Forecast cost +30% 15 Forecast cost +10% (With two decimal places for the final answer)The terms of the arrangement require the operator to: Construct a road-completing construction within two years Maintain and operate the road for three years Resurface the road at the end of Year 4 The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public The road is turn-over to the government at the end of Year 5 The operators determine that the implied interest rate is 24.42%. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Contract Cost Stand-alone selling price Forecast cost +10% Forecast cost +20% Forecast cost +30% Forecast cost +10% Year Construction Services 70 1 2 80 Operation Services Road resurfacing 3-5 25 4 15 TAM Compute for the profit for year 2.The terms of the arrangement require the operator to: Construct a road-completing construction within two years Maintain and operate the road for three years Resurface the road at the end of Year 4 The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public The road is turn-over to the government at the end of Year 5 The operators determine that the implied interest rate is 24.42%. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Year Contract Cost Stand-alone selling price Construction Service 1 70 Forecast cost + 10% 2 80 Forecast cost + 20% Operation Services 3-5 25 Forecast cost + 30% Road resurfacing 4 15 Forecast cost + 10% Compute for the profit for…
- The terms of the arrangement require the operator to: Construct a road-completing construction within two years Maintain and operate the road for three years Resurface the road at the end of Year 4 The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public The road is turn-over to the government at the end of Year 5 The operators determine that the implied interest rate is 24.42%. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Stand-alone selling price Forecast cost +10% Year Contract Cost Construction Services 70 80 Forecast cost +20% Operation Services Road resurfacing Forecast cost +30% Forecast cost +10% 35 25 4 15 Compute for the profit for year 2.A contractor enters into a contract for the expansion of an existing two-lane highway to a three-lane highway. The contract price is P65 million plus a P5 million award fee if the expansion is complete before the holiday travel season. The contract is expected to take one year to complete. The contractor has a long history of performing this type of highway work. The award fee is binary; that is, if the job is finished before the holiday travel season, the contractor receives the full award fee. The contractor does not receive any award fee if the highway is not finished before the holiday season. The contractor believes, based on its significant past experience, that it is 95 percent likely that the contract will be completed in advance of the holiday travel season. How much should the contractor account for the award fee? ______________The terms of the arrangement require the operator to: Construct a road-completing construction within two years Maintain and operate the road for three years Resurface the road at the end of Year 4 The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public The road is turn-over to the government at the end of Year 5 The operators determine that the implied interest rate is 24.42%. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Stand-alone selling price Forecast cost +10% Forecast cost +20% Forecast cost +30% Forecast cost +10% Year Contract Cost Construction Services 70 2 80 Operation Services Road resurfacing 25 15 35 4. Compute for the carrying amount of intangible asset at the end of year 2.
- ABC Co. a private contractor, wins a bid to construct a railway for the government. The terms of the arrangement are as follows: Construct a road- completing construction within a year; Maintain and operate the road for four years. Resurface the road when the original surface has deteriorated below specified condition. The operator estimates that it will have to undertake the resurfacing at the end of year 3. The operator collects toll fees of P200,000 per year. The contract ends in year 5. The operator estimates that the resurfacing expenditure increases by P5,000 for each year that the road is used. The appropriate discount rate is 10%. At contract inception, ABC Co. identifies a single performance obligation for construction services. ABC Co. makes the following estimates: YEAR CONTRACT COST STAND ALONE SELLING PRICE CONSTRUCTION SERVICE 1 200,000 FORECAST COST + 25% OPERATION SERVICE 2-5 15,000 N/A ROAD RESURFACE 3 10,000 N/A At the start of year 1, ABC Co. obtains…Rainy August Afternoon Co. (RAA) enters into a service concession arrangement whereby RAA undertakes to build a public infrastructure, operate that infrastructure over a specified period, and thereafter transfer it to the government (the grantor). In addition, RAA is obligated to recondition the infrastructure a year before it is handed over to the government. This is regardless of the infrastructure’s condition and level of usage. In return, the government promises to pay RAA a fixed amount of cash plus interest in each year during the operation period. During the construction period, RAA recognizes an asset that is reported in the financial statements as a. contract asset. b. receivable (a financial asset). c. intangible asset. d. property, plant and equipment. If the promise to grant a license is distinct and that the license provides the customer the “right to access” the entity’s intellectual property, how is revenue recognized from the initial fee in the contract? a. in full…Rainy August Afternoon Co. (RAA) enters into a service concession arrangement whereby RAA undertakes to build a public infrastructure, operate that infrastructure over a specified period, and thereafter transfer it to the government (the grantor). In addition, RAA is obligated to recondition the infrastructure a year before it is handed over to the government. This is regardless of the infrastructure’s condition and level of usage. In return, the government promises to pay RAA a fixed amount of cash plus interest in each year during the operation period. During the construction period, RAA recognizes an asset that is reported in the financial statements as contract asset. receivable (a financial asset). intangible asset. property, plant and equipment.