a

5% annual rate ÷ 12 months = 0.004167

Case B
Monthly cash flow 18,871
Multiply by: PV of ordinary annuity @ 0.01b, n=6 44.95504
Sale revenue 848,347

b
12% annual rate ÷ 12 months = 0.01

1. Solution: (100 shares per week x 52 weeks x ₱20) = ₱104,000

2. Solutions:
Requirement (a): Performance obligations
1. machine
2. spare parts
3. custodial services

Requirement (b): Revenue recognition

The entity allocates the transaction price to the three performance obligations
and recognizes the amounts allocated to each of the machine and spare
parts as revenue on December 31, 20x9. The amount allocated to the
custodial services is recognized over the next 2 to 4 years based on the
entity’s estimates of its progress towards the complete satisfaction of the
performance obligation.

3. Solution:
The contract modification results to the addition of services that are distinct.
However, the price of the additional services does not reflect their stand-
alone selling price. Therefore, the contract modification shall be accounted for
as a termination of the existing contract and the creation of a new
contract.

Accordingly, the entity recognizes revenue of ₱100,000 per year in the 1st
and 2nd years and ₱70,000 per year in the 3rd, 4th, 5th, and 6th years.
Revenue per year after the contract modification is computed as follows:

Modified* price of services from the original contract not yet

rendered (i.e., for the 3rd year of the original contract) 80,000
Price of the three additional years of service from the new 200,00
contract 0
Transaction price not yet recognized as revenue 280,000
Divide by: Total years of service to be rendered (3rd to 6th) 4
Revenue per year in the 3rd to the 6th year 70,000

* This is the amount of consideration to which ABC Co. expects to be entitled

in exchange for the services. Therefore, the initial agreement of ₱100,000 per
year is ignored.

1
Summary of answers:
Year Revenue
1 100,000
2 100,000
3 70,000
4 70,000
5 70,000
6 70,000
480,00
0