A company enters into a contract to build a factory for a customer. The agreed price is P2M and the specified completion date is 31 October 2019. However, the contract provides that the company should receive an incentive payment of a further P250,000 if the factory is completed by 30 September 2019. Similarly, the price will be reduced by P250,000 if the factory The company estimates that there is a 15% probability that the factory will be completed by 30 September 2019, an 80% probability that it will be completed in October 2019 or November 2019 and a 5% probability that it will not be completed until after 30 November 2019. is not completed until after 30 November 2019. 20. What is the expected value of the transaction price for this contract? P2M C. P1.975M P2.125M d. P2.025M

A company enters into a contract to build a factory for a customer. The agreed price is P2M and the specified completion date is 31 October 2019. However, the contract provides that the company should receive an incentive payment of a further P250,000 if the factory is completed by 30 September 2019. Similarly, the price will be reduced by P250,000 if the factory The company estimates that there is a 15% probability that the factory will be completed by 30 September 2019, an 80% probability that it will be completed in October 2019 or November 2019 and a 5% probability that it will not be completed until after 30 November 2019. is not completed until after 30 November 2019. 20. What is the expected value of the transaction price for this contract? P2M C. P1.975M P2.125M d. P2.025M

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Nvidia enters into a contract which pays $2,100/month for six months of services. In addition, there is a 70% chance the contract will pay an additional $3,500 and a 30% chance the contract will pay an additional $1,500, depending on the outcome of the contract. Assume Nvidia estimates variable consideration as the most likely amount. What is the amount of revenue Nvidia would recognize for the first month of the contract? Note: Do not round intermediate calculations. Round final answer to whole dollars. Multiple Choice $2,100 $2,450 ☐ $2,683
SMDC Construction is constructing an office building under contract for Onyx Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of P1,550,000 each quarter. The total contract price is P18,600,000 and SMDC Construction estimates total costs of P17,750,000. SMDC Construction estimates that the building will take 3 years to complete, and commences construction on January 2, 2018. SMDC Construction completes the remaining 25% of the building construction on December 31, 2020, as scheduled. At that time the total costs of construction are P18,750,000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that SMDC Construction will recognize for the year ended December 31, 2020? Revenue Expenses A. P18,600,000 P18,750,000 B. P4,650,000 P 4,687,500 C. P4,650,000 P 5,250,000 D. P4,687,500 P 4,687,500 Group of answer choices D C B A
On May 10, 2020, Cullumber Co. enters into a contract to deliver a product to Greig Inc. on June 15, 2020. Greig agrees to pay the full contract price of $1,980 on July 15, 2020. The cost of the goods is $1,280. Cullumber delivers the product to Greig on June 15, 2020, and receives payment on July 15, 2020. Prepare the journal entries for Cullumber related to this contract. Either party may terminate the contract without compensation until one of the parties performs.
Since 1970, Super Rise, Incorporated, has provided maintenance services for elevators. On January 1, 2024, Super Rise obtains a contract to maintain an elevator in a 90-story building in New York City for 10 months and receives a fixed payment of $98,000. The contract specifies that Super Rise will receive an additional $49,000 at the end of the 10 months if there is no unexpected delay, stoppage, or accident during the year. Super Rise estimates variable consideration to be the most likely amount it will receive. Required: Assume that, because the building sees a constant flux of people throughout the day, Super Rise is allowed to access the elevators and related mechanical equipment only between 3 a.m. and 5 a.m. on any given day, which is insufficient to perform some of the more time-consuming repair work. As a result, Super Rise believes that unexpected delays are likely and that it will not earn the bonus. Prepare the journal entry Super Rise would record on January 1. Assume…
ABC SAOG has entered a contract to supply a machinery on 1st December 2019 for OMR 1000,000 along with maintenance service for a period of 2 years with no additional charge. The payment terms were as follows: OMR 1000,000 if paid by 31st December 2019; OMR 1020,000 if paid by 31st January 2020; OMR 1040,000 if paid by 29th February 2020. It is highly probable that the customer will make payment in the month of January 2020. The stand-alone selling price for machinery was OMR 900,000 and the consideration for two years maintenance service is expected to be RO 300,000. What is the amount of obligation for maintenance service for two years? O a. OMR 250,000. Ob.OMR 100,000. Oc. OMR 750,000. O d. OMR 255,000.
On 27 January 2021, Johnson Engineering Ltd signed a contract to supply a new machine to Yummy Confectionary Ltd for $92,000 (including GST). This includes $75,000 for the machine (excluding GST), $2,000 for delivering and installing the machine (excluding GST) and $3,000 for servicing the machine in 6 months. Johnson Engineering Ltd delivers and installs the machine on 12 February 2021. An invoice for $92,000 is also given to Yummy Confectionary Ltd on this day. Yummy Confectionary Ltd transfers $92,000 to Johnson Engineering Ltd on 21 February 2021 via internet banking. Johnson Engineering Ltd services the machine on 12 August 2021. Required: Prepare journal entries for invoicing of the contract on 12 February 2021 and the servicing of the machine on 12 August 2021. Johnson Engineering Ltd’s General Journal: Date Account Names Debit Credit 12/2/2021 (To record the invoice for contract with…
Xtra Mechanical, Inc. is a manufacturer of machine parts with locations in the United States. It is considering entering into an eight year supply agreement with a customer where it will supply certain parts to the customer for their products. The project will require Xtra to purchase a new machine at the begining of the project and the cost of the machine is $8,500,000. At the end of the project, the machine is expected to be sold in the used market for 20% of the original cost before paying taver. The five year MACRS depreciation will be used for tax purposes. The depreciate rates are shown below. There is an initial networking capital investment of $15,000 and no further investment in not working capital is required. We assume that all the money tied up in the networking capital account will be recovered by the end of the project Revenues from the contract per year are shown below. Cost of goods sold is expected to be 50% of revenues. In addition to cost of goods seld, the project…
In August 2021, Commonlo Corp. commits to selling 100 of its merchandise to M&H Co. for P30,000 (P300 per product). The merchandise is to be delivered to M&H over the next 6 months. After 60 merchandises were delivered, the contract is modified and Commonlo promises to deliver 80 more products for an additional P21,600 (P270 per station). At year-end, Commonlo delivered an additional 90 products. All sales are cash on delivery. Assume that the additional term is a prospective modification to the original contract How much revenue will be recognized on the contract for the year 2021? Next « Previous
On May 1, 2021 Race Cars Inc. enters into a contract with a major U.S. racing program to design and distribute training equipment. Under the terms of the contract, Race Cars will deliver the training equipment on August 1, 2022. The customer will pay $300,000 to Race Cars, Inc. on May 15, 2021. Interest incurred on similar financing agreements in the industry is $35,000. What is the transaction price Which should Race Cars, Inc. recognize: interest expense or interest income for this transaction?