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Lewi Corp. enters into a contract with a customer to build an apartment building for $1,015,200. The customer hopes to rent apartments at the beginning
Lewi Corp. enters into a contract with a customer to build an apartment building for $1,015,200. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $159,900 to be paid if the building is ready for rental beginning August 1,2026. The bonus is reduced by $3,300 each week that completion is delayed. Lewi commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: (a) Determine the transaction price for the contract, assuming Lewi is only able to estimate whether the building can be completed by August 1,2026, or not (Lewi estimates that there is a 70% chance that the building will be completed by August 1.2026). Transaction price (b) Determine the transaction price for the contract, assuming Lewi has limited information with which to develop a reliable estimate of completion by the August 1, 2026, deadline. Transaction price $
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