Oriole Construction enters into a contract with a customer to build a warehouse for $ 860000 on March 30, 2021 with a performance bonus of $ 60000 if the building is completed by July 31, 2021. The bonus is reduced by $ 12000 each week that completion is delayed. Oriole commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2021 60% August 7, 2021 30% August 14, 2021 5% August 21, 2021 5%
Oriole Construction enters into a contract with a customer to build a warehouse for $ 860000 on March 30, 2021 with a performance bonus of $ 60000 if the building is completed by July 31, 2021. The bonus is reduced by $ 12000 each week that completion is delayed. Oriole commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2021 60% August 7, 2021 30% August 14, 2021 5% August 21, 2021 5%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Oriole Construction enters into a contract with a customer to build a warehouse for $ 860000 on March 30, 2021 with a performance bonus of $ 60000 if the building is completed by July 31, 2021. The bonus is reduced by $ 12000 each week that completion is delayed. Oriole commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by | Probability |
July 31, 2021 | 60% |
August 7, 2021 | 30% |
August 14, 2021 | 5% |
August 21, 2021 | 5% |
The transaction price for this transaction is
$ 913400
$ 557400
$ 860000
$ 569400
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