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Chapter 13Accounting for Build-Operate-Transfer(BOT)PROBLEM 1: TRUE OR FALSE FALSE – public sector entity or government TRUE FALSE – intangible asset TRUE FALSE – intangible asset PROBLEM 2: MULTIPLE CHOICE – THEORY1. D B - (a) is “Philippine Accountancy Act of 2004” (c) is “Tax Reform Act of 1997” ...

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Chapter 13 Accounting for Build-Operate-Transfer (BOT) PROBLEM 1: TRUE OR FALSE 1. FALSE – public sector entity or government 2. TRUE 3. FALSE – intangible asset 4. TRUE 5. FALSE – intangible asset

PROBLEM 2: MULTIPLE CHOICE – THEORY 1. D 2. B - (a) is “Philippine Accountancy Act of 2004” (c) is “Tax Reform Act of 1997” 3. D 4. D 5. C

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PROBLEM 3: MULTIPLE CHOICE – COMPUTATIONAL 1. A 2. B Solution: Date

Int. income

Amortization

Revenue

a

b = PV x 19.10%

c=a-b

d

300

99 218

(99) 82

520 520 11

Collections

1/1/Yr. 1 12/31/Yr.1 12/31/Yr.2 12/31/Yr.3

The revenues are computed as follows: Year Performance obligation Year 1 Construction services (400M x 130%) Year 2 Construction services (400M x 130%) Year 3 Operation services (10M x 110%)

PV e = prev. bal. - c + d

520 1,139 1,068

Revenues 520 520 11

3. C Solution: Revenue Contract costs Interest income Profit

Year 2 520 (400) 99 219

4. C (See solution in preceding question) 5. B 6. D 7. D

Year 3 11 (10) 218 219

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8. B Solution: Yr. 1 Yr. 1 Yr. 2 Yr. 2

Construction services (400M x 130%) Borrowing costs (100M x 10%) Construction services (400M x 130%) Borrowing costs (100M x 10%) Carrying amt. of intangible asset at the end of Yr. 2 Amortization expense in Year 3

520 10 520 10 1,060 (132.5)

Carrying amt. of intangible asset at the end of Yr. 3

927.50

The amortization expense is computed as follows (1,060 ÷ 8 = 132.5).

9. B Solution: Revenue Contract costs Amortization expense Interest expense Profit (Loss)

Year 2 520 (400) (132.50) (12.50)

10. A (See solution in preceding problem)

Year 3 300 (10) (132.50) (10) 148

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PROBLEM 4: FOR CLASSROOM DISCUSSION 1. D 2. D 3. A 4. C (15M construction costs x 120%) = 18M 5. C (5M operation costs x 105%) = 5.25M 6. B 7. D 8. C (15M construction costs x 120%) = 18M 9. D - 20M, the fees collected from railway users 10. C Solution: Total construction costs (15M x 2 yrs.) Multiply by: Initial carrying amount of intangible asset Multiply by: (7 / 8) (a) Carrying amount of intangible asset at the end of Year 3 (a)

7 years remaining over 8-year useful life (i.e., Years 3 to 10)

30 120% 36 7/8 31.50...