(a) Determine the transaction price for this contract, assuming Brown is only able to estimate whether the building can be completed by August 1, 2023, or not. (Brown estimates that there is a 68% chance that the building will be completed by August 1, 2023.) Transaction price $
(a) Determine the transaction price for this contract, assuming Brown is only able to estimate whether the building can be completed by August 1, 2023, or not. (Brown estimates that there is a 68% chance that the building will be completed by August 1, 2023.) Transaction price $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
as show in the pic
![Brown Corp. enters into a contract with a customer to build an apartment building for $1,190,000. The customer hopes to rent
apartments at the beginning of the school year and offers a performance bonus of $129,000 to be paid if the building is ready for
rental beginning August 1, 2023. The bonus is reduced by $43,000 each week that completion is delayed. Brown commonly includes
these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by
August 1, 2023
August 8, 2023
August 15, 2023
After August 15, 2023
(a)
Probability
Transaction price
68 %
20
7
5
Determine the transaction price for this contract, assuming Brown is only able to estimate whether the building can be completed
by August 1, 2023, or not. (Brown estimates that there is a 68% chance that the building will be completed by August 1, 2023.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F422a3402-f0e9-4c20-b89e-5230245172a8%2F8587818d-31d2-4a28-8290-51b697426ef3%2Fqo72juf_processed.png&w=3840&q=75)
Transcribed Image Text:Brown Corp. enters into a contract with a customer to build an apartment building for $1,190,000. The customer hopes to rent
apartments at the beginning of the school year and offers a performance bonus of $129,000 to be paid if the building is ready for
rental beginning August 1, 2023. The bonus is reduced by $43,000 each week that completion is delayed. Brown commonly includes
these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by
August 1, 2023
August 8, 2023
August 15, 2023
After August 15, 2023
(a)
Probability
Transaction price
68 %
20
7
5
Determine the transaction price for this contract, assuming Brown is only able to estimate whether the building can be completed
by August 1, 2023, or not. (Brown estimates that there is a 68% chance that the building will be completed by August 1, 2023.)
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