Walker Corp. enters into a contract with a customer to build an apartment building for $910,000. The customer hopes to rent apartments at the beginning of the school year and offers a performance bonus of $126,000 to be paid if the building is ready for rental beginning August 1, 2023. The bonus is reduced by $42,000 each week that completion is delayed. Walker commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by August 1, 2023 August 8, 2023 August 15, 2023 After August 15, 2023 (a) Transaction price Probability $ 61 % 20 14 Determine the transaction price for this contract, assuming Walker is only able to estimate whether the building can be completed by August 1, 2023, or not. (Walker estimates that there is a 61% chance that the building will be completed by August 1, 2023.) 5

Walker Corp. enters into a contract with a customer to build an apartment building for $910,000. The customer hopes to rent apartments at the beginning of the school year and offers a performance bonus of $126,000 to be paid if the building is ready for rental beginning August 1, 2023. The bonus is reduced by $42,000 each week that completion is delayed. Walker commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by August 1, 2023 August 8, 2023 August 15, 2023 After August 15, 2023 (a) Transaction price Probability $ 61 % 20 14 Determine the transaction price for this contract, assuming Walker is only able to estimate whether the building can be completed by August 1, 2023, or not. (Walker estimates that there is a 61% chance that the building will be completed by August 1, 2023.) 5

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 6P

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