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On March 1, 2017, Elkhart enters into a new contract to build a specialized warehouse $7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract state that if the warehouse is useable by November 30, 2017, will receive a bonus of $600.000, For every week after November 30 that the Elkhart house is not usable, the bonus will decrease by $150,000, Elkhart provides the following completion schedule:

3. What is the objective of determining the transaction price based on the amount of variable consideration?

Problem 1 (25 points On March 1, 2017, Elkhart enters into a new contract to build a specialized warehouse for $7 million. obligation. The contract state that if the warehouse is useable by November 30, 2017, The promise to transfer the warehouse is determined to be a performance Eikhart will receive a bonus of $600,000, For every week after November 30 that the warehouse is not usable, the bonus will decrease by S150,000. Elkhart provides the following completion schedule: Expected Completion Date Probability November 30, 2017 December 7, 2017 December 14, 2017 December 21, 2017 December 28, 2017 60% 20 10 Required: 1. Assume that Elkhart used the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart used the most likely approach. What amount should Elkhart use for the transaction price? 3. What is the objective of determining the transaction price based on the amount of variable consideration

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