Omni-Resistor, Inc. specializes in waterproofing homes, office buildings and other structures. Recently it completed a waterproofing renovation for a building at a local university. The contract specifies that Omni-Resistor will receive a flat lump sum of $100,000 for the renovation, and an additional $2,500 if there is no roof leaking through the roof within the first year after the renovation. The seller estimates that there is an 85% chance that no leakage will occur within the first year.

Required:
a. Assuming Omni-Resistor uses the mest likely value to estimate the variable consideration, calculate the transaction price.
b. Assuming Omni-Resistor determines transaction price as the expected value of the variable consideration, calculate the transaction price.
c. Assume Omni-Resistor uses the expected value" approach, but is very uncertain of that estimate due to a lack of experience with similar renovations.