Wildhorse Corp enters into a contract with a customer to bui

Wildhorse Corp. enters into a contract with a customer to build an apartment building for1,000,800. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $135 600 to be paid if the building is ready for ental beginning August 1 2018. The bonus is reduced by 45 200 each week that completion is delayed. Wildhorse common includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability August 1, 2018 August 8, 2018 August 15, 2018 After August 15, 20185 (a Determine the transaction price for the contract, assuming wildhorse is only able to estimate whether the building can be completed by August 1,2018, or not wildhorse estimates that there is a 70% 70% 20 chance that the building will be completed by August 1, 2018). (If answer is 0, please enter 0. Do not leave any fields blank.) Transaction Price (b) Determine the transaction price for the contract, assuming Wildhorse has limited Information wlth which to develop a rellable estimate of completion by the August 1, 2018, deadline. (If answer is o, please enter 0. Do not leave any fields blank.) Transaction Price

Solution

a Transaction price = 1000800+135600 = 1136400 b Transaction price = $1000800