Entity A is a listed company in Hong Kong. It is famous for the construction of power supplier plants in Southeast Asia. Entity A enters into a construction contract (Contract C) with Entity B to build a plant for $4,120,000 on 1 April 2022. To encourage completion on time, Entity B agreed to pay a performance bonus of 30% contract price that would be paid based on the actual completion time. The amount of the performance bonus decreases by 20% per week for every week if the completion date is beyond the agreed completion date. The requirements of the contract are similar to the contracts that Entity A has performed before, and the directors of Entity A believe that such experience is predictive for Contract C with Entity B. They estimated that there was a 41% probability it would be completed 1 week late. A 23% probability it would be completed 2 weeks late. A 11% probability it would be completed 3 weeks late. A 7% probability it would be completed 4 weeks late. Thus, the remaining probability was that Contract C will be completed on time.

REQUIRED:

Measure the amount of variable consideration of Contract C based on the Expected Value Method and the Most Likely Amount Method under HKFRS 15.

ANSWER:

Expected Value Method = $

Most Likely Amount Method = $