Construction Cast Study - Participant.docx

Construction Cast Study - Participant.docx - Construction...

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Construction revenue recognition - Case Study Contract terms / transaction facts: HammerTime Construction (“HammerTime” or the “Company”) won a bid with the Texas Department of Transportation (“TDOT”) for the design and build of 3 miles of highway ($30 million) and the design and build of a ¼ mile long bridge ($10 million). The contract with all relevant terms and conditions is signed by the Company and TDOT on 1/1/20X6 and construction is to be complete in 18 months (by 6/30/20X7). There is a general cancellation provision for non- performance of the contract. HammerTime has significant experience in designing and building highways, as well as experience in designing and building bridges. Third parties will be used for lighting, signage, flagmen, and design of the bridge. The Company is eligible to receive an early completion bonus calculated on the original contract amount as follows: o 25% bonus if completed in 14 months (30% probable) o 10% bonus if completed in 16 months (50% probable) o
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