1. Probability weighted estimate

Fitzgerald Construction Company enters into a contract with Merno Corp. to build a new manufacturing facility for $4,000,000. Merno hopes to use the facility as soon as possible and provides a performance bonus of $200,000 to be paid if the facility is ready for September 1, 2018. The bonus is reduced by $50,000 each week that completion is delayed. Fitzgerald has built many similar structures in the past and comes up with the following estimates

Completion Date Probability

September 1, 2018 60%

September 8, 2018 20%

September 15, 2018 10%

After September 15, 2018 10%

1. Using the probability weighted estimate, calculate the transition price
2. Using the most likely estimate, calculate the transaction price

2. Revenue with TVM

On January 1, 2018, Andover Inc. sells goods to Miller Company in exchange for a note with a face value of $14,000, with total payment due in once year. The fair value of the goods at the date of sale is $11,000. The cost to make the goods totaled $5,300. Prepare the journal entries to record this transaction on January 1, 2017.