Question: Problem 4 (15 Points) Mets Construction enters into a contract with a customer to build a warehouse for $900,000 on March 30, 2019 with a

 Problem 4 (15 Points) Mets Construction enters into a contract with

Problem 4 (15 Points) Mets Construction enters into a contract with a customer to build a warehouse for $900,000 on March 30, 2019 with a performance bonus of $100,000 if the building is completed by July 31. 2019. The bonus is reduced by S10,000 each week that completion is delayed. Mets commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Probability Completed by July 31, 2019 70% 1596 August 7, 2019 10% August 14, 2019 August 21, 2019 5% A) Determine the transaction price of this contract, assuming Mets uses Expected Value (probability weighted) method. B) Determine the transaction price of this contract assuming Mets uses Most Likely Outcome method

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!