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Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2020, with a performance bonus of $50,000
Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2020, with a performance bonus of $50,000 if the building is completed by July 31, 2020. The bonus is reduced by $10,000 each week that completion is delayed. Marle Construction commonly includes these completion bonuses in its contracts, and based on prior experience, estimates the following completion outcomes: Probability 65% Completed by: July 31, 2020 August 7, 2020 August 14, 2020 August 21, 2020 25% 5% 5% The transaction price for this transaction using the expected value (probability) method is: 5950.000 $685,000 5995.000 $652 500
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