Question
RomeoConstruction enters into a contract with a customer to build a warehouse for $800,000 on March 30, 2014 with an additional performance bonus of $50,000
RomeoConstruction enters into a contract with a customer to build a warehouse for $800,000 on March 30, 2014 with an additional performance bonus of $50,000 if the building is completed by July 31, 2014. The bonus is reduced by $10,000 each week that completion is delayed. Romeo commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
July 31, 2014 : 70%
August 7, 2014: 30%
The transaction price for this transaction, based on most likely outcome, is
a) 847,000
b) 835,000
c) 850,000
d) 800,000
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