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2.
Jeff Heun, president of Ivanhoe Always, agrees to construct a concrete cart path at Dakota Golf Club. Ivanhoe Always enters into a contract with Dakota to construct the path for $232,000. In addition, as part of the contract, a performance bonus of $41,600 will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agreed-upon date. The performance bonus decreases by $10,400 per week for every week beyond the agreed-upon completion date. Jeff has been involved in a number of contracts that had performance bonuses as part of the agreement in the past. As a result, he is fairly confident that he will receive a good portion of the performance bonus. Jeff estimates, given the constraints of his schedule related to other jobs, that there is 55% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late. (a) Determine the transaction price that Ivanhoe Always should compute for this agreement. Flint Company manufactures equipment. Flint's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Flint has the following arrangement with Winkerbean Inc. - Winkerbean purchases equipment from Flint for a price of $1,040,000 and contracts with Flint to install the equipment. Flint charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Flint determines installation service is estimated to have a standalone selling price of $51,000. The cost of the equipment is $620,000. - Winkerbean is obligated to pay Flint the $1,040,000 upon the delivery and installation of the equipment. Flint delivers the equipment on June 1,2020, and completes the installation of the equipment on September 30 , 2020. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. How should the transaction price of $1,040,000 be allocated among the service obligations? (Do not round intermediate calculations. Round final answers to 0 decimal places.) Equipment $ Installation $
