Reference no: EM132712334

Nair Corp. enters into a contract with a customer to build an apartment building for $1,028,000. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $186,000 to be paid if the building is ready for rental beginning August 1, 2015. The bonus is reduced by $62,000 each week that completion is delayed. Nair commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:

                                   Completed by Probability

August 1, 2015                      70%

August 8, 2015                       20

August 15, 2015                     5

After August 15, 2015              5

Problem 1: Determine the transaction price for this contract.