Referring to the revenue arrangement in BE17.6, determine the transaction price for the contract, assuming 

(a) Nair is only able to estimate whether the building can be completed by August 1, 2026, or not (Nair estimates that there is a 70% chance that the building will be completed by August 1, 2026), and 

(b) Nair has limited information with which to develop a reliable estimate of completion by the August 1, 2026, deadline.

Data from BE17.6

Nair Corp. enters into a contract with a customer to build an apartment building for $1,000,000. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $150,000 to be paid if the building is ready for rental beginning August 1, 2026. The bonus is reduced by $50,000 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:

Determine the transaction price for this contract.

Transcribed Image Text:

Completed by August 1, 2026 August 8, 2026 August 15, 2026 After August 15, 2026 Probability 70% 20 5 5