Pharoah Construction Company enters into a contract with a customer to build a warehouse for $211,000, with a performancebonus of $105,500 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 10% perweek for every week beyond the agreed-on completion date. The contract requirements are similar to contracts that Pharoah hasperformed previously, and management believes that such experience is predictive for this contract. Management estimates thatthere is a 60% probability that the contract will be completed by the agreed-on completion date, a 30% probability that it will becompleted one week late, and a 10% probability that it will be completed two weeks late. whats the tranction pricein probolity weighted method

Pharoah Construction Company enters into a contract with a customer to build a warehouse for $211,000, with a performancebonus of $105,500 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 10% perweek for every week beyond the agreed-on completion date. The contract requirements are similar to contracts that Pharoah hasperformed previously, and management believes that such experience is predictive for this contract. Management estimates thatthere is a 60% probability that the contract will be completed by the agreed-on completion date, a 30% probability that it will becompleted one week late, and a 10% probability that it will be completed two weeks late. whats the tranction pricein probolity weighted method

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 2RE: Yankee Corp. agrees to provide Albany Company 24 months of coaching services. The contract sets the...

See similar textbooks

Similar questions

Pharoah Construction Company enters into a contract with a customer to build a warehouse for $211,000, with a performancebonus of $105,500 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 10% perweek for every week beyond the agreed-on completion date. The contract requirements are similar to contracts that Pharoah hasperformed previously, and management believes that such experience is predictive for this contract. Management estimates thatthere is a 60% probability that the contract will be completed by the agreed-on completion date, a 30% probability that it will becompleted one week late, and a 10% probability that it will be completed two weeks late. whats the tranction price.
Oriole Company enters into a contract with a customer to build a warehouse for $401900, with a performance bonus of $101900 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 20% per week for every week beyond the agreed-upon completion date. The contract requirements are similar to contracts that Oriole has performed previously, and management believes that such experience is predictive for this contract. Management estimates that there is a 50% probability that the contract will be completed by the agreed-upon completion date, a 30% probability that it will be completed 1 week late, and a 20% probability that it will be completed 2 weeks late. What is the total transaction price for this revenue arrangement? $489534 $503800 $483420 $463040
Concrete Company enters into a contract with a customer to build a warehouse for $200,000, with a performance bonus of $40,000 that will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agree-upon date. The performance bonus decreases by $10,000 per week for every week beyond the agreed-upon completion date. Management estimates that there is a 55% probability that he will complete the project on time, a 30% probability that it will be completed 1 week late, and a 15% probability that it will be completed 2 weeks late. (1). Determine the transaction price that Concrete should compute for this agreement. (2). Assuming that Concrete believes that the probability for completing the project on time is 90% and otherwise it will be finished 1 week late. Determine the transaction price.
Jonas Consulting enters into a contract to provide cost management consulting services over a 1-year period for $10,000 per month. At the end of the contract, Jonas will either give the customer a $24,000 refund or be entitled to an additional $24,000, depending on the level of cost savings. The company believes there is an 80% chance that it will be entitled to an additional $24,000 and a 20% chance it will give a refund of $24,000. In addition, Jonas believes it is probable that a significant reversal of any previously recognized revenue will not occur. The contract performance is determined to be satisfied over time. Required: 1. Determine the monthly transaction price that Jonas should use for recording the contract and prepare Jonas’s journal entry at the end of the first month of the contract using the most likely amount approach.
Nvidia enters into a contract which pays $2,100/month for six months of services. In addition, there is a 70% chance the contract will pay an additional $3,500 and a 30% chance the contract will pay an additional $1,500, depending on the outcome of the contract. Assume Nvidia estimates variable consideration as the most likely amount. What is the amount of revenue Nvidia would recognize for the first month of the contract? Note: Do not round intermediate calculations. Round final answer to whole dollars. Multiple Choice $2,100 $2,450 ☐ $2,683
On January 1, Revis Consulting entered into a contract to complete a cost reduction program for Green Financialover a six-month period. Revis will receive $20,000 from Green at the end of each month. If total cost savingsreach a specific target, Revis will receive an additional $10,000 from Green at the end of the contract, but if totalcost savings fall short, Revis will refund $10,000 to Green. Revis estimates an 80% chance that cost savings willreach the target and calculates the contract price based on the expected value of future payments to be received.Required:Prepare the following journal entries for Revis:1. Prepare the journal entry on January 31 to record the collection of cash and recognition of the first month’srevenue.2. Assuming total cost savings exceed target, prepare the journal entry on June 30 to record receipt of the bonus.3. Assuming total cost savings fall short of target, prepare the journal entry on June 30 to record payment of thepenalty
On January 1, Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a six-month period. Revis will receive $68,000 from Green at the end of each month. If total cost savings reach a specific target, Revis will receive an additional $34,000 from Green at the end of the contract, but if total cost savings fall short, Revis will refund $34,000 to Green. Revis estimates an 80% chance that cost savings will reach the target and calculates the contract price based on the expected value of future payments to be received. Required: Prepare the following journal entries for Revis: 1. Prepare the journal entry on January 31 to record the collection of cash and recognition of the first month's revenue. 2. Assuming total cost savings exceed target, prepare the journal entry on June 30 to record receipt of the bonus. 3. Assuming total cost savings fall short of target, prepare the journal entry on June 30 to record payment of the penalty. Note: If no…
On January 1, Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a six-month period. Revis will receive $51,200 from Green at the end of each month. If total cost savings reach a specific target, Revis will receive an additional $25,600 from Green at the end of the contract, but if total cost savings fall short, Revis will refund $25,600 to Green. Revis estimates an 80% chance that cost savings will reach the target and calculates the contract price based on the expected value of future payments to be received.Required:Prepare the following journal entries for Revis:1. to 3. Prepare the journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue. Also record the entry on June 30 for receipt of the bonus assuming total cost savings exceed target. And record the entry on June 30 for payment of the penalty assuming total cost savings fall short of target. Do not give answer in image
Philbrick Company signed a three-year contract to develop custom sales training materials and provide training to the employees of Elliot Company. The contract price is $1,200 per employee and the number of employees to be trained is 400. Philbrick can send a bill to Elliot at the end of every training session. Once developed, the custom training materials will belong to Elliot Company, but Philbrick does not consider them to be a separate performance obligation.The expected number to be trained in each year and the expected development and training costs follow. Number ofemployees Developmentand trainingcosts incurred 2019 125 $ 65,000 2020 200 80,000 2021 75 30,000 Total 400 $175,000 For each year, compute the revenue, expense, and gross profit reported assuming revenue is recognized over time using...1. the number of employees trained as a measure of the value provided to the customer.Note: Round answers to the nearest dollar. Year 2019 2020 2021 Total…
Sugar has entered into a long-term contract to build an asset for a customer, Hewer. Sugar will satisfy the performance obligation over time and has measured the progress towards satisfying the performance obligation at 45% at the year end. The price of the contract is $8 million. Sugar has spent $4.5 million to date, but the estimated costs to complete are $5.5 million. To date, Hewer has paid Sugar $3 million. What is the net liability that should be recorded in Sugar’s statement of financial position?
s
An environmental soil cleaning company received a contract to remove BTEX contamination from an oil company tank farm site. The contract required the soil cleaning company to provide quarterly invoices for materials and services provided. If the material costs were $140,000 per quarter and the service charges were calculated as an additional 20% of the material costs, what is the present worth of the contract through the 3-year treatment period at an interest rate of 1% per month?