Determine the transaction price

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Nair Corp. enters into a contract with a customer to build an apartment building for $1,005,000. 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, 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 completion 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.

Reference no: EM13859039

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