Sanjeev enters into a contract offering uncertain consideration. The contract pays him $1,000/month for six months of continuous consulting services. In addition, there is a 60% chance the contract will pay an additional $2,000 and a 40% chance the contract will pay an additional $3,000, depending on the outcome of the consulting contract. Sanjeev estimates uncertain consideration using the most likely amount. What is the amount of revenue Sanjeev would recognize for the first month of the contract?

Question

Quizplus · Accepted Answer

Since Sanjeev estimates uncertain consideration using the most likely amount, he would recognize $1,333 ($1,000 for the consulting services plus 60% chance of receiving $2,000 and 40% chance of receiving $3,000) for the first month of the contract.

Sanjeev Enters into a Contract Offering Uncertain Consideration