Reference no: EM132537783

Question - A new skating rink is going to be built in the village of Nobel for $5.2 million. Rayne Inc. was awarded the contract, which calls for construction to begin in March 20X5 and be completed by November 30, 20X6. If the skating rink is completed early, a performance bonus will be awarded. The bonus payment varies depending on how early the skating rink can be completed. Rayne's estimated probability of completing construction by those dates is as follows: Potential completion date Bonus payment Estimated probability August 31, 20X6 $250,000 10% September 30, 20X6 $200,000 15% October 31, 20X6 $100,000 35% November 30, 20X6 Nil 30% December 1, 20X6, or later Nil 10% Rayne uses expected value techniques to estimate the variable consideration.

Required - What transaction price should the company use to recognize revenues for this contract?

a) $5,200,000

b) $5,235,000

c) $5,290,000

d) $5,300,000