Question

Concord 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, 2021. The bonus is reduced by $52,000 each week that completion is delayed. Concord 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 6 After August 15, 2021 4 Determine the transaction price for this contract.

Answer 1

$133,120

Step-by-step explanation:

Calculation to Determine the transaction price for this contract

August 1, 2021 transaction price =$156,000*.7

August 1, 2021 transaction price=$109,200

August 8, 2021 transaction price=(156,000-$52,000)*.2

August 8, 2021 transaction price=$104,000*.2

August 8, 2021 transaction price=$20,800

August 15, 2021 transaction price=$52,000*.06

August 15, 2021 transaction price=$3,120

August 15, 2021 transaction price=$0*.04

August 15, 2021 transaction price=0

Total transaction price = $109,200+$20,800+$3,120+$0

Total transaction price = $133,120

Therefore the transaction price for this contract will be $133,120