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.
Jonas Consulting enters into a contract to provide cost management consulting services over a 1-year period for $10,000 per month. At the end of the contract, Jonas will either give the customer a $24,000 refund or be entitled to an additional $24,000, depending on the level of cost savings. The company believes there is an 80% chance that it will be entitled to an additional $24,000 and a 20% chance it will give a refund of $24,000. In addition, Jonas believes it is probable that a significant reversal of any previously recognized revenue will not occur. The contract performance is determined to be satisfied over time. Required: 1. Determine the monthly transaction price that Jonas should use for recording the contract and prepare Jonas’s journal entry at the end of the first month of the contract using the most likely amount approach.
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
On January 1, Revis Consulting entered into a contract to complete a cost reduction program for Green Financialover a six-month period. Revis will receive $20,000 from Green at the end of each month. If total cost savingsreach a specific target, Revis will receive an additional $10,000 from Green at the end of the contract, but if totalcost savings fall short, Revis will refund $10,000 to Green. Revis estimates an 80% chance that cost savings willreach the target and calculates the contract price based on the expected value of future payments to be received.Required:Prepare the following journal entries for Revis:1. Prepare the journal entry on January 31 to record the collection of cash and recognition of the first month’srevenue.2. Assuming total cost savings exceed target, prepare the journal entry on June 30 to record receipt of the bonus.3. Assuming total cost savings fall short of target, prepare the journal entry on June 30 to record payment of thepenalty
On January 1, Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a six-month period. Revis will receive $68,000 from Green at the end of each month. If total cost savings reach a specific target, Revis will receive an additional $34,000 from Green at the end of the contract, but if total cost savings fall short, Revis will refund $34,000 to Green. Revis estimates an 80% chance that cost savings will reach the target and calculates the contract price based on the expected value of future payments to be received. Required: Prepare the following journal entries for Revis: 1. Prepare the journal entry on January 31 to record the collection of cash and recognition of the first month's revenue. 2. Assuming total cost savings exceed target, prepare the journal entry on June 30 to record receipt of the bonus. 3. Assuming total cost savings fall short of target, prepare the journal entry on June 30 to record payment of the penalty. Note: If no…
On January 1, Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a six-month period. Revis will receive $51,200 from Green at the end of each month. If total cost savings reach a specific target, Revis will receive an additional $25,600 from Green at the end of the contract, but if total cost savings fall short, Revis will refund $25,600 to Green. Revis estimates an 80% chance that cost savings will reach the target and calculates the contract price based on the expected value of future payments to be received.Required:Prepare the following journal entries for Revis:1. to 3. Prepare the journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue. Also record the entry on June 30 for receipt of the bonus assuming total cost savings exceed target. And record the entry on June 30 for payment of the penalty assuming total cost savings fall short of target. Do not give answer in image
Jeff Heun, president of Bridgeport Always, agrees to construct a concrete cart path at Dakota Golf Club. Bridgeport Always enters into a contract with Dakota to construct the path for $181,000. In addition, as part of the contract, a performance bonus of $39,600 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 $9,900 per week for every week beyond the agreed-upon completion date. Jeff 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. Jeff estimates, given the constraints of his schedule related to other jobs, that there is 60% probability that he will complete the project on time, a 25% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late. (a) Determine the…
Determining the Transaction Price for a Revenue Contract A contractor enters into a revenue contract with a customer to build customized equipment for $180,000 with a performance bonus of $99,000 that will be paid based on how quickly the equipment is completed. The amount of the performance bonus decreases by 15% of the original bonus per week for every week beyond the agreed upon completion date. The contractor has had experiences with similar contracts and thus has the data to predict the timing of completion of the contract. Therefore, the contractor concludes that the expected value method is the best predictor of revenue. The contractor estimates that there is a 60% probability that the contract will be completed by the agreed-upon completion date, a 35% probability that it will be completed one week late, and a 5% probability that it will be completed two weeks late. Complete the following table in order to determine the transaction price for revenue recognition for the…
Paul Harrid, president of Crane Always, agrees to construct a concrete cart path at Waterway Golf Club. Crane Always enters into a contract with Waterway to construct the path for $195,000. 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. Paul 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. Paul estimates, given the constraints of his schedule related to other jobs, that there is 60% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 10% probability that he will be 2 weeks late. (a) Determine the transaction price that…
Jeff Heun, president of Wildhorse Always, agrees to construct a concrete cart path at Dakota Golf Club. Wildhorse Always enters into a contract with Dakota to construct the path for $233,000. In addition, as part of the contract, a performance bonus of $42,800 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 $10,700 per week for every week beyond the agreed-upon completion date. Jeff 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. Jeff estimates, given the constraints of his schedule related to other jobs, that there is 55% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late. a.) Determine the transaction…
Jeff Heun, president of Concrete Always, agrees to construct a concrete cart path at Dakota Golf Club. Concrete Always enters into a contract with Dakota to construct the path for $200,000. In addition, as part of the contract, a performance bonus of $40,000 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 $10,000 per week for every week beyond the agreed-upon completion date. Jeff 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. Jeff estimates, given the constraints of his schedule related to other jobs, that there is 55% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late. Instructions a. Determine the transaction…