Reference no: EM132438932

Question - Acme Construction enters into a contract with a customer to build a warehouse for $600,000 on March 30, 2020 with a performance bonus of $30,000 if the building is completed by August 31, 2020. The bonus is reduced by $10,000 each week that completion is delayed. Acme commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:

Completed by Probability

August 31, 2020 60%

September 7, 2020 30%

September 14, 2020 10%

Assume that Acme uses the expected value approach. What is the transaction price for this transaction? Ignore the possibility that an applicable constraint may apply.

$630,000

$625,000

$615,000

$600,000

Assume that Acme uses the most likely amount approach. What is the transaction price for this transaction?

$630,000

$625,000

$615,000

$600,000