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MarleConstructionentersintoacontractwithacustomertobuildawarehousefor$950,000onMarch 30, 2018 with a performance bonus of $50,000 if the building is completed by...

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Accounting

MarleConstructionentersintoacontractwithacustomertobuildawarehousefor$950,000onMarch 30, 2018 with a performance bonus of $50,000 if the building is completed by July 31, 2018. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these

completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:

Completed by

Probability

July 31, 2018

65%

August 7, 2018

25%

August 14, 2018

5%

August 21, 2018

5%

The transaction price for this transaction is

A) $995,000

B) $950,000

C) $652,500

D) $685,000

Answer & Explanation Solved by verified expert
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