FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Miller Corp. enters into a contract with a customer to build an apartment building for $1,079,000. The customer hopes to rent
apartments at the beginning of the school year and provides a performance bonus of $153,000 to be paid if the building is ready for
rental beginning August 1, 2026. The bonus is reduced by $51,000 each week that completion is delayed. Miller commonly includes
these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by
August 1, 2026
August 8, 2026
August 15, 2026
After August 15,2026
Transaction price
(a) Determine the transaction price for the contract, assuming Miller is only able to estimate whether the building can be completed by
August 1, 2026, or not (Miller estimates that there is a 70% chance that the building will be completed by August 1, 2026).
Transaction price
Probability
70 %
Save for Later
20
5
(b) Determine the transaction price for the contract, assuming Miller has limited information with which to develop a reliable estimate
of completion by the August 1, 2026, deadline.
$
5
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Transcribed Image Text:Miller Corp. enters into a contract with a customer to build an apartment building for $1,079,000. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $153,000 to be paid if the building is ready for rental beginning August 1, 2026. The bonus is reduced by $51,000 each week that completion is delayed. Miller commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by August 1, 2026 August 8, 2026 August 15, 2026 After August 15,2026 Transaction price (a) Determine the transaction price for the contract, assuming Miller is only able to estimate whether the building can be completed by August 1, 2026, or not (Miller estimates that there is a 70% chance that the building will be completed by August 1, 2026). Transaction price Probability 70 % Save for Later 20 5 (b) Determine the transaction price for the contract, assuming Miller has limited information with which to develop a reliable estimate of completion by the August 1, 2026, deadline. $ 5 Attempts: 0 of 1 used Submit Answer
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