Nair Corp. enters into a contract with a customer to build an apartment building for $1,000,000. The
Question:
Nair Corp. enters into a contract with a customer to build an apartment building for $1,000,000. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $150,000 to be paid if the building is ready for rental beginning August 1, 2021. The bonus is reduced by $50,000 each week that completion is delayed. Nair commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by Probability
August 1, 2021.............................70%
August 8, 2021...............................20
August 15, 2021...............................5
After August 15, 2021......................5
Determine the transaction price for this contract.
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119503668
17th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel