A company enters into a contract to build a factory for a customer. The agreed price is P2M and the specified completion date is 31 October 2019. However, the contract provides that the company should receive an incentive payment of a further P250,000 if the factory is completed by 30 September 2019. Similarly, the price will be reduced by P250,000 if the factory The company estimates that there is a 15% probability that the factory will be completed by 30 September 2019, an 80% probability that it will be completed in October 2019 or November 2019 and a 5% probability that it will not be completed until after 30 November 2019. is not completed until after 30 November 2019. 20. What is the expected value of the transaction price for this contract? P2M C. P1.975M P2.125M d. P2.025M
A company enters into a contract to build a factory for a customer. The agreed price is P2M and the specified completion date is 31 October 2019. However, the contract provides that the company should receive an incentive payment of a further P250,000 if the factory is completed by 30 September 2019. Similarly, the price will be reduced by P250,000 if the factory The company estimates that there is a 15% probability that the factory will be completed by 30 September 2019, an 80% probability that it will be completed in October 2019 or November 2019 and a 5% probability that it will not be completed until after 30 November 2019. is not completed until after 30 November 2019. 20. What is the expected value of the transaction price for this contract? P2M C. P1.975M P2.125M d. P2.025M
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 13E: On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million....
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