Assume Emmet estimates variable consideration as the expected value.How much revenue should Emmet recognize on this contract in 2016?

Question

Quizplus · Accepted Answer

The total transaction price is $30,000 (fixed fee of $25,000 + variable consideration of $5,000). Since variable consideration is estimated using the expected value method, the revenue should be recognized based on the probability-weighted amount ($5,000 x 35% = $1,750). Therefore, the total revenue recognized in 2016 would be $26,125 ($25,000 + $1,750).

Assume Emmet Estimates Variable Consideration as the Expected Value