This is about revenue recognition. I only need the answer to BE 18-6, but please use 18-5 for reference. Thank you!

BE18-5

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 perfor-

mance bonus of $150,000 to be paid if the building is ready for rental beginning August 1, 2015. 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 comple-

tion outcomes:

Completed by Probability

August 1, 2015 70%

August 8, 2015 20

August 15, 2015 5

After August 15, 2015 5

Determine the transaction price for this contract.

BE18-6

Referring to the revenue arrangement in BE18-5, determine the transaction price for the contract,

assuming (a) Nair is only able to estimate whether the building can be completed by August 1, 2015, or

not (Nair estimates that there is a 70% chance that the building will be completed by August 1, 2015), and

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

2015, deadline