Pharoah Construction Company enters into a contract with a customer to build a warehouse for $211,000, with a performancebonus of $105,500 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 10% perweek for every week beyond the agreed-on completion date. The contract requirements are similar to contracts that Pharoah hasperformed previously, and management believes that such experience is predictive for this contract. Management estimates thatthere is a 60% probability that the contract will be completed by the agreed-on completion date, a 30% probability that it will becompleted one week late, and a 10% probability that it will be completed two weeks late. whats the tranction price.

Pharoah Construction Company enters into a contract with a customer to build a warehouse for $211,000, with a performancebonus of $105,500 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 10% perweek for every week beyond the agreed-on completion date. The contract requirements are similar to contracts that Pharoah hasperformed previously, and management believes that such experience is predictive for this contract. Management estimates thatthere is a 60% probability that the contract will be completed by the agreed-on completion date, a 30% probability that it will becompleted one week late, and a 10% probability that it will be completed two weeks late. whats the tranction price.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 10C

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Pharoah Construction Company enters into a contract with a customer to build a warehouse for $211,000, with a performancebonus of $105,500 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 10% perweek for every week beyond the agreed-on completion date. The contract requirements are similar to contracts that Pharoah hasperformed previously, and management believes that such experience is predictive for this contract. Management estimates thatthere is a 60% probability that the contract will be completed by the agreed-on completion date, a 30% probability that it will becompleted one week late, and a 10% probability that it will be completed two weeks late. whats the tranction pricein probolity weighted method
Concrete Company enters into a contract with a customer to build a warehouse for $200,000, with a performance bonus of $40,000 that will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agree-upon date. The performance bonus decreases by $10,000 per week for every week beyond the agreed-upon completion date. Management estimates that there is a 55% probability that he will complete the project on time, a 30% probability that it will be completed 1 week late, and a 15% probability that it will be completed 2 weeks late. (1). Determine the transaction price that Concrete should compute for this agreement. (2). Assuming that Concrete believes that the probability for completing the project on time is 90% and otherwise it will be finished 1 week late. Determine the transaction price.
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
Sugar has entered into a long-term contract to build an asset for a customer, Hewer. Sugar will satisfy the performance obligation over time and has measured the progress towards satisfying the performance obligation at 45% at the year end. The price of the contract is $8 million. Sugar has spent $4.5 million to date, but the estimated costs to complete are $5.5 million. To date, Hewer has paid Sugar $3 million. What is the net liability that should be recorded in Sugar’s statement of financial position?
Grouper Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $260,015, and its unguaranteed residual value at the end of the lease term is estimated to be $20,500. National will pay annual payments of $37,300 at the beginning of each year. Grouper incurred costs of $195,000 in manufacturing the equipment and $4,100 in sales commissions in closing the lease. Grouper has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%.
Kingbird Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $304,659, and its unguaranteed residual value at the end of the lease term is estimated to be $19.400. National will pay annual payments of $40,800 at the beginning of each year. Kingbird incurred costs of $164,100 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Kingbird has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessor. This is a sales-type lease Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, eg. 5.275) (1) Lease receivable S (2) Sales price S (3) Cost of sales $
Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee.
Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a sales-type lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final…
Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee.
Crane Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Cheyenne Airlines for a period of 10 years. The normal selling price of the equipment is $252,640, and its unguaranteed residual value at the end of the lease term is estimated to be $21,300. Cheyenne will pay annual payments of $37,500 at the beginning of each year. Crane incurred costs of $173,900 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Crane has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Cheyenne Airlines has an incremental borrowing rate of 11%. Click here to view factor tables. (a) Your Answer Correct Answer (Used) Your answer is correct. Discuss the nature of this lease in relation to the lessee. This is a finance lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer…
Bridgeport Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Indigo Airlines for a period of 10 years. The normal selling price of the equipment is $281,987, and its unguaranteed residual value at the end of the lease term is estimated to be $21,100. Indigo will pay annual payments of $42,000 at the beginning of each year. Bridgeport incurred costs of $193,400 in manufacturing the equipment and $3,800 in sales commissions in closing the lease. Bridgeport has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Indigo Airlines has an incremental borrowing rate of 11%.
The Waygate Corporation is interested in contracting out a testing function.Two firms have submitted bids. Waygate believes that both companies will be able to deliver equivalent services for the 5-year period. Determine which one Waygate should choose if the corporate MARR (investment market rate) is 25% and price inflation is assumed to be 3.5% per year over the next 5 years. Company Alpha costs: Costs will be $150,000 in year-1 dollars the first year and will increase at a rate of 5% over the 5-year period. Company Beta costs: Costs will be a constant $150,000 per year in terms of today’s dollars over the 5-year period.