The terms of the arrangement require the operator to: Construct a road-completing construction within two years Maintain and operate the road for three years Resurface the road at the end of Year 4...

The terms of the arrangement require the operator to:

• Construct a road-completing construction within two years


• Maintain and operate the road for three years


• Resurface the road at the end of Year 4


• The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public


• The road is turn-over to the government at the end of Year 5


• The operators determine that the implied interest rate is 24.42%.


• The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77%

The operator makes the following estimates:

Compute for the profit for year 2.

Please show your good accounting form for the solution. Thank you!