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Problem 2 On January 1, 2022, Losing Him Was Blueprint Company entered into a contract with Maserati LLC to construct a production facility down
Problem 2 On January 1, 2022, Losing Him Was Blueprint Company entered into a contract with Maserati LLC to construct a production facility down a dead-end street. The base price specified in the contract is P15,000,000, but subject to the following clauses: The target completion date is December 31, 2024. The price will be reduced by P100,000 for every day that the completion is delayed, up to a limit of P1,000,000. The price will be increased by P50,000 for every day that the project is completed ahead of the target date, up to a cap of P500,000. A bonus of P1,500,000 will be added to the contract price if the facility is awarded the Swift Environmental Sustainability Award. In 2022, the constructors estimate that there is a 20% chance of the project being completed 5 days ahead of the plan, 30% chance that the project will be completed on the target date, and 50% chance that the project will be completed 15 days in delay. Also, there is a remote chance of achieving the Swift Environmental Sustainability Award at project completion. In 2023, the constructors estimate that there is a 40% chance of the project being completed 12 days ahead of the plan, and a 50% chance that the project will be completed on the target date, and a 10% chance that the project will be completed 5 days in delay. Also, due to a revolutionary breakthrough in its construction process, the chance of achieving the Swift Environmental Sustainability Award at project completion is now reasonably assured. Due to the multiple possibilities for the actual completion date, the management of the construction company has determined that the "expected value approach" will be best to predict the variable consideration concerned. On the other hand, since there are only two possibilities regarding the Swift Environmental Sustainability Award, the management has decided that the "most likely amount" will best predict the variable consideration concerned. The following relevant information were available for the first two years of construction:
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