John William, president of Crane Always, agrees to construct a concrete cart path at Windsor Golf Club. Crane Always enters into a contract with Windsor to construct the path for $212,000. In addition, as part of the contract, a performance bonus of $46,800 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 $11,700 per week for every week beyond the agreed-upon completion date. John 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. John estimates, given the constraints of his schedule related to other jobs, that there is 50% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 20% probability that he will be 2 weeks late. (a) Determine the transaction price that Crane Always should compute for this agreement. Transaction price $

John William, president of Crane Always, agrees to construct a concrete cart path at Windsor Golf Club. Crane Always enters into a contract with Windsor to construct the path for $212,000. In addition, as part of the contract, a performance bonus of $46,800 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 $11,700 per week for every week beyond the agreed-upon completion date. John 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. John estimates, given the constraints of his schedule related to other jobs, that there is 50% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 20% probability that he will be 2 weeks late. (a) Determine the transaction price that Crane Always should compute for this agreement. Transaction price $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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