Use the following information for the next six questions:
Foggy Friday Co. (FFC), a private entity, enters into a service concession arrangement. The terms of
the agreement require FFC to:
 Construct an underground railway system – completing construction within two years;
 Maintain and operate the railway for 8 years after the completion;
 Recondition the railway at the end of the 9th year; and
 Turnover the railway to the government at the end of the 10th year.
As consideration, the government pays the operator ₱80M per year in Years 3 to 10. FFC makes the following estimates at contract inception:

 All cash flows are assumed to take place at the end of the year. FFC determines that the implied
interest rate in the contract is 33.05%.
5. How many performance obligations are there in the contract?

a. one
b. two
c. three
d. four

6. What is the nature of the consideration in the contract?
a. financial asset
b. intangible asset
c. partly financial asset and partly intangible asset
d. property, plant and equipment

7. How much service revenue is recognized in Year 2?
a. 60
b. 80
c. 28
d. 0

8. How much service revenue is recognized in Year 5?
a. 80
b. 28
c. 108
d. 0

9. How much service revenue is recognized in Year 9?
a. 39 c. 91
b. 119 d. 80

10. How much is the carrying amount of the asset recognized on the contract as of the end of Year 4?
(round-off decimals)
a. 140

b. 136 

c. 134

d. 126

Transcribed Image Text:

Year Contract costs Stand-alone selling price Construction services 1 50 Forecast cost + 20% 50 Forecast cost + 20% Operation services 3-10 20 Forecast cost + 40% Reconditioning 9. 10 Forecast cost + 10% Year Contract costs Stand-alone selling price Construction services 1 50 Forecast cost + 20% 50 Forecast cost + 20% Operation services 3-10 20 Forecast cost + 40% Reconditioning 9. 10 Forecast cost + 10%

Answer rating: 100% (QA)

5 d four 6 a financial asset Here the payment is as yearly installment ... View the full answer