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Marle 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. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:

Completed by Probability
31-Jul-18 65%
7-Aug-18 25%
14-Aug-18 5%
21-Aug-18 5%

Required:
Determine the amount of the transaction price.

Respuesta :

Answer:

$995,000

Explanation:

The computation of the amount of the transaction price is shown below;

July 31, 2018 ($950,000+$50,000) × 0.65 =  $650,000

August 7, 2018  ($950,000+$40,000) × 0.25 = $247,500

August 14, 2018 ($950,000 + $30,000) × .05 = $49,000

August 21, 2018 ($950,000 + $20,000) × .05 = $48,500

Total $995,000

In this way it should be calculated

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