Question

Sarasota Corp. enters into a contract with a customer to build an apartment building for $1,045,500....

Sarasota Corp. enters into a contract with a customer to build an apartment building for $1,045,500. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $139,800 to be paid if the building is ready for rental beginning August 1, 2021. The bonus is reduced by $46,600 each week that completion is delayed. Sarasota 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 5 After August 15, 2021 5 Determine the transaction price for this contract. Transaction Price

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Answer #1
Transaction price 1164330
Workings:
Completed by Expected contract amount Probability Transaction price
August 1,2021 1185300 70% 829710
August 8,2021 1138700 20% 227740
August 15,2021 1092100 5% 54605
After August 15,2021 1045500 5% 52275
Total 1164330
Completed by Expected contract amount
August 1,2021 1185300 =1045500+139800
August 8,2021 1138700 =1045500+(139800-46600)
August 15,2021 1092100 =1045500+(139800-46600-46600)
After August 15,2021 1045500
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