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MOUNTAIN VIEW COLLEGE
SCHOOL OF BUSINESS AND ACCOUNTANCY
ACCOUNTING FOR SPECIAL TRANSACTIONS
WORKSHEET#8: LONGTERM CONSTRUCTION CONTRACTS
INSTRUCTIONS: Answers and all necessary solutions to the requirements must be written in a clean
sheet of paper (all in good form). Submission format must be image file(png or
jpeg) or pdf file.
PROBLEM #1
Luke Consulting enters into a contract with Holland University to restructure Holland's processes for purchasing
goods from suppliers. The contract states that Luke will earn a fixed fee of P25,000 and earn an additional
P10,000 if Holland achieves P100,000 of cost savings. Luke estimates a 50% chance that Holland will achieve
P100,000 of cost savings.
Required: Assuming that Luke determines the transaction price as the expected value of expected consideration,
