William Corp. enters into a contract with a customer to build an apartment building for $1,056,300. The customer hopes to rentapartments at the beginning of the school year and provides a performance bonus of $136,200 to be paid if the building is ready forrental beginning August 1, 2026. The bonus is reduced by $45,400 each week that completion is delayed. William commonly includesthese completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:Completed byAugust 1, 2026August 8, 2026August 15, 2026After August 15, 2026Transaction price$ProbabilityLA70 %20Determine the transaction price for this contract.55SUPPORT

Transaction price refers to the expected amount while exchanging the goods or services with the…

Answered: William Corp. enters into a contract…

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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Bridgeport Corp. enters into a contract with a customer to build an apartment building for $921,300. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $156,000 to be paid if the building is ready for rental beginning August 1, 2018. The bonus is reduced by $52,000 each week that completion is delayed. Bridgeport commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability August 1, 2018 70 % August 8, 2018 20 August 15, 2018 6 After August 15, 2018 4 Determine the transaction price for this contract.
A company enters into a contract with a customer to build a building, with a performance bonus of $33,500 if the building is completed by September 30, 2021. The bonus is reduced by $5,000 each week that completion is delayed. The company commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by ProbabilitySeptember 30, 2021 70%October 7, 2021 15%October 14, 2021 10%October 21, 2021 5%The amount of revenue the company should recognize related to this bonus is $_______________.
ABC Inc, a telecommunications operator, entered into a contract with Mr. X on March 1, 20x2. In line with the contract, Mr. X will subscribe to ABC Inc's monthly plan for 12 months and in return Mr. X receives a free cellphone from ABC Inc. Mr. X will pay a monthly fee of P5,000. Mr. X will get immediately the handset after the contract signing. ABC Inc sells the same handset for P26,000 and the same monthly plan for P3,250 per month without the handset. Determine the revenue to recognized by H Inc. on April 30, 20x7. [A] 27,000 [B] 5,000 [C] 3,250 [D] 3,000
Larkspur Inc. was incorporated in 2019 to operate as a financial service firm, with an accounting fiscal year ending April 30. Larkspur's primary product is a sophisticated online investment management system; its customers pay a fixed fee plus a usage charge for using the system. Larkspur has leased a large, GenX computer system from the manufacturer. The lease calls for a monthly rental of $24,500 for the 144 months (12 years) of the lease term. The estimated useful life of the computer is 14 years. All rentals are payable on the first day of the month beginning with April 1, 2020, the date the computer was installed and the lease agreement was signed. The lease is non-cancelable for its 12-year term, and it is secured only by the manufacturer's chattel lien on the GenX system. This lease is to be accounted for as a finance lease by Larkspur, and the asset will be amortized by the straight-line method. Borrowed funds for this type of transaction would cost Larkspur 6% per year (0.5%…
Since 1970, Super Rise, Incorporated, has provided maintenance services for elevators. On January 1, 2024, Super Rise obtains a contract to maintain an elevator in a 90-story building in New York City for 10 months and receives a fixed payment of $98,000. The contract specifies that Super Rise will receive an additional $49,000 at the end of the 10 months if there is no unexpected delay, stoppage, or accident during the year. Super Rise estimates variable consideration to be the most likely amount it will receive. Required: Assume that, because the building sees a constant flux of people throughout the day, Super Rise is allowed to access the elevators and related mechanical equipment only between 3 a.m. and 5 a.m. on any given day, which is insufficient to perform some of the more time-consuming repair work. As a result, Super Rise believes that unexpected delays are likely and that it will not earn the bonus. Prepare the journal entry Super Rise would record on January 1. Assume…
The actuary for the pension plan of Indigo Inc. calculated the following net gains and losses. Incurred during the Year 2020 2021 2022 2023 As of January 1, Other information about the company's pension obligation and plan assets is as follows. 2020 2021 2022 (Gain) or Loss $302,200 476,600 2023 (210,400) (291,300) Projected Benefit Obligation $4,029,300 4,515,400 5,019,900 4,255,600 Plan Assets (market-related asset value) $2,423,700 2,180,800 2,580,100 3,067,900 Indigo Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total service-years for all participating employees is 4,400. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2020. The market-related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization. Compute the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension…
SmaGlo, Inc., a telecommunications operator, entered into a contract with Kim Dorothy on March 1,20x7. In line with the contract, Kim Dorothy subscribes for SmaGlo's monthly plan for 12 months and in retum Kim Dorothy receives a free Apple I-Phone handset from SmaGlo. Kim Dorothy will pay a monthly fee of P1,200. Kim Dorothy gets the handset immediately after contract signature. SmaGlo sells the same handsets for P2,400 and the same monthly plans for P800 per month without handset. On March 31,20x7, the amount of accounts receivable to be recorded A. 1,200 B. None
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Draker Corporation entered into a contract with a customer to build a warehouse for $1,900,000 on March 18, 2017 with a performance bonus of $100,000 if the building is completed by July 31, 2017. The bonus is reduced by $20,000 each week that completion is delayed. Draker commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by July 31, 2017 August 7, 2017 August 14, 2017 August 21, 2017 Using the expected value method, the transaction price for this transaction is O $1,900,000 O $1,370,000 O$1,990,000 O$1,305,000 Probability 65% 25% 5% 5%
The following situations are independent: 1. Mark Installation completes a $4,000 contract, starting work on June 16, and completing the work on July 15. The home builder pays them $1,000 in advance on June 15, $2,600 on July 15, and the balance ($400) when the home is sold in September. 2. An interior designer signs a contract in December 2020 to provide design services to a home builder, related to decorating a new show home. The contract is valued at $25,000 and the designer receives a 10% down payment upon signing the contract. All design work is done during January 2021. On February 1, 2021, the show home opens to the public and the home builder pays the 90% balance remaining on the contract. 3. A lawyer has a meeting with a new client on April 15 and agrees to represent her in a legal case. The fee negotiated is to be based on the number of hours the lawyer spends on the case. At the end of the meeting, the client pays the lawyer $500 as a "retainer." The case involves research…
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