Alonzo Construction enters into a contract with a customer to build a warehouse for $600,000...
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Alonzo Construction enters into a contract with a customer to build a warehouse for $600,000 on May 31, 2021 with a performance bonus of $80,000 if the building is completed by August 31, 2021. The bonus is reduced by $20,000 each week that completion is delayed. Alonzo commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
| Completed by | Probability |
| August 31, 2021 | 70% |
| September 7, 2021 | 20% |
| September 14, 2021 | 10% |
The transaction price for this transaction is
a.
$600,000
b.
$672,000
c.
$476,000
d.
$420,000
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