Orlando Amusement Park in Tampa, FL announced on August 1, 2018 that they will have a new

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Orlando Amusement Park in Tampa, FL announced on August 1, 2018 that they will have a new attraction for the 2019 season. The new ride is called “Space Swirl” and is a river boat ride that will replace the existing attraction “Lazy River”. Orlando will also be renovating the Main Hall for the 2019 season. In order to build the “Space Swirl” the existing ride (located in the same space) “Last River” had to be removed. The “Space Swirl” will be built on the same site as the “Lazy River” once it is removed. The Main Hall renovation will require extensive interior upgrades to the existing facility.

Cypress & Co., Inc. is an amusement park contracting company and has extensive experience constructing rides/buildings for amusement parks in the United States. On August 1, 2018
Cypress & Co., Inc. and Orlando entered into a written agreement for Cypress & Co. to remove the existing “Lazy River” ride, build “Space Swirl” and to renovate the Main Hall at Orlando. The target completion date of all construction is May 15, 2019. Other companies could have also removed the existing ride and renovated the Main Hall, however Orlando decided to hire one company to do all of the work. Orlando has excellent credit.

Payment terms are as follows:

Total price to remove existing “Lazy River”, construct “Space Swirl” and renovate the Main Hall: $8,000,000. The “Space Swirl” has a one year base warranty on all machinery and Orlando also elected to purchase the 5 year extended warranty for $1,000,000 for a total purchase price of $9,000,000. Standalone pricing for this job were as follows: Removal of “Lazy River”: $2,000,000, Construction of “Space Swirl”: $6,000,000, renovation of Main Hall: $3,000,000, Extended Warranty$1,000,000.

Orlando has agreed to pay Cypress & Co. 15 months after the completion of “Space Swirl” and the Main Hall renovation. Interest rates on comparable projects are 4% and equates to $350,000 for the 15 months.

Orlando is offering Cypress & Co. an incentive to ensure completion of the construction of the “Space Swirl” on a timely basis. Orlando is offering Cypress & Co. the following incentive:

Completion of construction of Space Swirl by March 1, 2019 $400,000 Bonus
Completion of construction of Space Swirl by April 1, 2019 $200,000 Bonus
Completion of construction of Space Swirl by May 1, 2019 $ 75,000 Bonus
Completion after May 1, 2019 $ 0 Bonus

Cypress & Co. estimates that based upon their significant experience in the industry they have a 70% likelihood of completing the construction by March 1, 15% likelihood by April 1^st, 10% likelihood of completion by May 1^st and 5% likelihood the project will be completed on time.

Cypree and Co.’s fiscal year is January 1-December 31 and is publicly traded.

Required:

Apply the requirements of revenue from contracts with customers. Make sure you apply the detailed guidance from the codification.

For each of the five steps: (PLEASE COMPLETE STEP 3: Determine the transaction price)

Describe how the revenue from contracts with customers applies to this transaction. For any step that is not applicable simply indicate that it is not applicable. Clearly label all of your work. Make sure you fully explain/document all of the steps and your conclusions.