How much is the service revenue recognize on Year 9a. 28b. 60c. 39d. 80e. zero As consideration, the government pays the operator PSOM per year in Years 3 to 10. FFC makes the following estimates atcontract inception:ContractStand-aloneYearselling priceForecast cost + 20%Forecast cost+ 20%costsConstruction services1P5050Operation servicesReconditioning3-1020Forecast cost + 40%9.10Forecast cost + 10%All cash flows are assumed to take place at the end of the year. FFC determines that the implied interest rate in thecontract is 33.05%.

The revenue recognized is the amount that has been recognized in the financial statement of the…

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How much is the service revenue recognize on Year 9 a. 28 b. 60 c. 39 d. 80 e. zero

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

How much is the service revenue recognize on Year 9

a. 28

b. 60

c. 39

d. 80

e. zero

As consideration, the government pays the operator PSOM per year in Years 3 to 10. FFC makes the following estimates at
contract inception:
Contract
Stand-alone
Year
selling price
Forecast cost + 20%
Forecast cost+ 20%
costs
Construction services
1
P50
50
Operation services
Reconditioning
3-10
20
Forecast cost + 40%
9.
10
Forecast cost + 10%
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%.

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