MITCH T.

MINGLANA
BSA 301

PROBLEM 3:
A. Compute for the amount of revenue to be recognized in Year 3, assume that the
company employs the effort expended method of estimating percentage of
completion and the company measures its progress by the number of support
timbers laid in the trail

ANSWER AND SOLUTION:

Year 2 Year 3
Timbers laid each year 300 500
Add: timbers laid in prior years 150 450
Timber laid to date 450 950
Add: additional support timbers to be laid 520 0
Total estimated timbers 970 950__

Percentage of completion 45/97 100%

Multiplied by: contract price P800, 000 P800, 000
Recognized revenue to date P371, 134 P800, 000
Recognized revenue in prior years 371, 134
Recognized Revenue in Current Year P428, 866

B. Compute the amount of revenue to be recognized in Year 3 assume that the

company employs and output measure and the company measures its progress by
the number of trail feet that have been completed

ANSWER AND SOLUTION:

Year 2 Year 3
Total feet each 7,500 8,000
Add: Trail fees in prior years 3,000 10,500
Trail Feet to date 10,500 18,500
Add: Additional trail feet to be constructed 8,200 0____
Total estimated Trail Feet 18,700 18,500

Percentage of completion 10.5/18.7 100%

Multiplied by: Contract price P800, 000 P800, 000
Recognized Revenue to date P449, 198 P800, 000
Recognized revenue in prior years 449,198
Recognized Revenue in Current Year P350, 802