Question - Show computations for each of the following, and clearly show your final answer using the answer sheet provided.
VAP company enters into a contract with a customer to build a factory for $1,000,000 on January 10, 2014 with a performance bonus of $100,000 if the factory is completed by August 31, 2014. The bonus is reduced by $10,000 each week that completion is delayed. VAP commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by Probability
August 31, 2014 90%
September 7, 2014 5%
September 14, 2014 3%
September 21, 2014 2%
Show calculations to determine the transaction price for this contract.