Question

In: Accounting

Indigo Corp. enters into a contract with a customer to build an apartment building for $1,061,800....

Indigo Corp. enters into a contract with a customer to build an apartment building for $1,061,800. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $139,200 to be paid if the building is ready for rental beginning August 1, 2021. The bonus is reduced by $46,400 each week that completion is delayed. Indigo 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.

Transaction Price $enter the transaction price for this contract

Solutions

Expert Solution

A B A x B
Completed by Probability Bonus Expected Bonus
August 1, 2021 70%               139,200                    97,440
August 8, 2021 20%                  92,800                    18,560
August 15, 2021 6%                  46,400                      2,784
After August 15, 2021 4%                          -                               -  
Total                118,784
Transaction Price $ 1,180,584 =1061800+118784

ekkarill92 answered 2 years ago
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