Aztec Company contracted with the Kirk Company to review their revenue recognition policies for recording sales. The contract will pay Aztec $800,000 in the form of a fixed fee. Aztec will also receive $150,000 additionally if Kirk achieves $200,000 in additional revenues. Aztec estimates a 70% chance that Kirk Company will achieve $200,000 in additional revenues. Refer to Aztec Company. Assume that Aztec estimates that the transaction price is the probability weighted amount of expected consideration. The transaction price is ________.
A) $905,000
B) $800,000
C) $560,000
D) $240,000

Question

Quizplus · Accepted Answer

The transaction price is calculated as the fixed fee plus the probability-weighted additional fee: $800,000 + ($150,000 * 70%) = $905,000.

Aztec Company Contracted with the Kirk Company to Review Their