6. Quick Construction enters into a contract with a customer to build a warehous

Question

6. Quick Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2018 with a performance bonus of $50,000 if the building is completed by July 31, 2018. The bonus is reduced by $10,000 each week that completion is delayed. Quick commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Probability Completed by July 31, 2018 August 7, 2018 August 14, 2018 August 21, 2018 65% 25% 5% 5% What was the transaction price for this transaction?

Explanation / Answer

Transaction price for this transaction =950000+(50000*65%)+(40000*25%)+(30000*5%)+(20000*5%)= 995000

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