Nair A.G. enters into a contract withacustomer to build an apartment building for(1,000,000. The customer hopes to rent apartments at the beginning of the school yearand provides a performance bonus of €150,000 to be paid if the building is ready forrental beginning August 1, 2023. The bonus is reduced by €50,000 each week thatcompletion is delayed. Nair commonly includes these completion bonuses in itscontracts and, based on prior experience, estimates the following completionoutcomes:

 

(Determine Transaction Price) Jeff Heun,president of Concrete Always, agrees to construct a concrete cartpath at Dakota Golf Club. Concrete Always enters into a contractwith Dakota to construct the path for $200,000. In addition, aspart of the contract, a performance bonus of $40,000 will be paidbased on the timing of completion. The performance bonus will bepaid fully if completed by the agreed-upon date. The performancebonus decreases by $10,000 per week for every week beyond theagreed-upon completion date. Jeff has been involved in a number ofcontracts that had performance bonuses as part of the agreement inthe past. As a result, he is fairly confident that he will receivea good portion of the performance bonus. Jeff estimates, given theconstraints of his schedule related to other jobs , that there is55% probability that he will complete the project on time, a 30%probability that he will be 1 week late, and a 15% probability thathe will be 2 weeks late.

(a) Determine the transaction price that Concrete Always shouldcompute for this agreement.
(b) Assume that Jeff Heun has reviewed his work schedule anddecided that it makes sense to complete this project on
time. Assuming that he now believes that the probability forcompleting the project on time is 90% and otherwise it will
be finished 1 week late, determine the transaction price.

In 2015, Modern Construction Company entered into a contract toconstruct a building for $5,000,000. The estimated cost to completethe building is $4,000,000 and the project will be completed in2016. Modern incurred actual construction costs of $1,600,000 and$1,800,000 in 2015 and 2016, respectively.

How much gross profit is recognized using the percentage ofcompletion method in 2015 and 2016?

Please show work to help me understand how to calculatethis.