Swifty Corp. enters into a contract with a customer to build an apartment building for $1,046,900. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $148,500 to be paid if the building is ready for rental beginning August 1, 2021. The bonus is reduced by $49,500 each week that completion is delayed. Swifty commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability August 1, 2021 70 % August 8, 2021 20 August 15, 2021 4 After August 15, 2021 6 Determine the transaction price for this contract.
Swifty Corp. enters into a contract with a customer to build an apartment building for $1,046,900. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $148,500 to be paid if the building is ready for rental beginning August 1, 2021. The bonus is reduced by $49,500 each week that completion is delayed. Swifty commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability August 1, 2021 70 % August 8, 2021 20 August 15, 2021 4 After August 15, 2021 6 Determine the transaction price for this contract.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Swifty Corp. enters into a contract with a customer to build an apartment building for $1,046,900. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $148,500 to be paid if the building is ready for rental beginning August 1, 2021. The bonus is reduced by $49,500 each week that completion is delayed. Swifty commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
| Completed by | Probability | ||
|---|---|---|---|
|
August 1, 2021
|
70 | % | |
|
August 8, 2021
|
20 | ||
|
August 15, 2021
|
4 | ||
|
After August 15, 2021
|
6 |
Determine the transaction price for this contract.
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