On January 01, 2022, Noelydio entered into a contract with Baby Lyra to build an item of specialized equipment for delivery on April 30, 2023. However, the exact delivery date is hard to estimate. The amount of consideration specified in the contract is P300,000, but the customer is willing to pay a higher price if delivered earlier (i.e., amount will be increased or decreased by P500 for each day, depending on whether the actual delivery date is before or after April 30, 2023). Below is the sensitivity analysis: 20% likelihood that product will be delivered on April 30, 2023; 50% likelihood that product will be delivered 30 days before April 30, 2023; and 30% likelihood that product will be delivered 30 days after April 30, 2023. How much should Noelydio determine as the amount of transaction price for this contract?
On January 01, 2022, Noelydio entered into a contract with Baby Lyra to build an item of specialized equipment for delivery on April 30, 2023. However, the exact delivery date is hard to estimate. The amount of consideration specified in the contract is P300,000, but the customer is willing to pay a higher price if delivered earlier (i.e., amount will be increased or decreased by P500 for each day, depending on whether the actual delivery date is before or after April 30, 2023). Below is the sensitivity analysis: 20% likelihood that product will be delivered on April 30, 2023; 50% likelihood that product will be delivered 30 days before April 30, 2023; and 30% likelihood that product will be delivered 30 days after April 30, 2023. How much should Noelydio determine as the amount of transaction price for this contract?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 01, 2022, Noelydio entered into a contract with Baby Lyra to build an item of specialized equipment for delivery on April 30, 2023. However, the exact delivery date is hard to estimate. The amount of consideration specified in the contract is P300,000, but the customer is willing to pay a higher price if delivered earlier (i.e., amount will be increased or decreased by P500 for each day, depending on whether the actual delivery date is before or after April 30, 2023). Below is the sensitivity analysis:
- 20% likelihood that product will be delivered on April 30, 2023;
- 50% likelihood that product will be delivered 30 days before April 30, 2023; and
- 30% likelihood that product will be delivered 30 days after April 30, 2023.
How much should Noelydio determine as the amount of transaction price for this contract?
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