A contractor enters into a revenue contract to construct customized equipment for a customer. The contract price is $250,000 plus a $125,000 bonus if the customized equipment is completed by a specified date. The contract is expected to take three years to complete. The contractor has extensive experience in building customized equipment. The award fee is paid only if the customized equipment is completed by the agreed upon date. Otherwise, the contractor receives no bonus. The contractor estimates that it is 85% likely that the contract will be completed successfully and in advance of the target date. Required Determine the transaction price for revenue recognition for the contractor.
A contractor enters into a revenue contract to construct customized equipment for a customer. The contract price is $250,000 plus a $125,000 bonus if the customized equipment is completed by a specified date. The contract is expected to take three years to complete. The contractor has extensive experience in building customized equipment. The award fee is paid only if the customized equipment is completed by the agreed upon date. Otherwise, the contractor receives no bonus. The contractor estimates that it is 85% likely that the contract will be completed successfully and in advance of the target date. Required Determine the transaction price for revenue recognition for the contractor.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A contractor enters into a revenue contract to construct customized equipment for a customer. The
contract price is $250,000 plus a $125,000 bonus if the customized equipment is completed by a
specified date. The contract is expected to take three years to complete. The contractor has extensive
experience in building customized equipment. The award fee is paid only if the customized
equipment is completed by the agreed upon date. Otherwise, the contractor receives no bonus. The
contractor estimates that it is 85% likely that the contract will be completed successfully and in
advance of the target date. Required Determine the transaction price for revenue recognition for the
contractor.
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