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Draker Corporation entered into a contract with a customer to build a warehouse for $1,900,000 on March 18, 2017 with a performance bonus of
Draker Corporation entered into a contract with a customer to build a warehouse for $1,900,000 on March 18, 2017 with a performance bonus of $100,000 if the building is completed by July 31, 2017. The bonus is reduced by $20,000 each week that completion is delayed. Draker commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by July 31, 2017 August 7, 2017 August 14, 2017 Probability 65% 25% 5% 5% August 21, 2017 Using the expected value method, the transaction price for this transaction is O $1,900,000 O $1,370,000 O $1,990,000 1 O $1.305,000
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