its not 7,487,500
Variable Consideration On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for $7 million. The promise to transfer the warehouse is determined to be performance obligation. The contract states that the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of $600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by $150,000. Elkhart provides the following completion schedule: Expected Completion Date Probability November 30, 2019 60% December 7, 2019 December 14, 2019 December 21, 2019 December 28, 2019 Required: 1. Assume that Elkhart uses the expected valve approach. What amount should Elkhart use for the transaction price? Transaction price $ 7,400,000 X 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? Transaction price $ 7,600,000 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists? The constraint on the variable consideration included in the transaction price is aimed at preventing over recognition to be reversed when the uncertainty associated with the variable consideration is resolved. of revenue in one period that would have Variable Consideration On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for $7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of $600,000. For every week after! November 30 that the warehouse is not usable, the bonus will decrease by $150,000. Elkhart provides the following completion schedule: Expected Completion Date Probability November 30, 2019 60% December 7, 2019 December 14, 2019 December 21, 2019 December 28, 2019 Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? Transaction price 7,487,500 X 2. Assume that Elkhart uses the most likely amoun approach. What amount should Elkhart use for the transaction price? Transaction price $ 7,500,000 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists? The constraint on the variable consideration included in the transaction price is aimed at preventing over recognition to be reversed when the uncertainty associated with the variable consideration is resolved. of revenue in one period that would have
