Sanjeev enters into a contract that pays him $1,000 each month for six months of continuous consulting services. Inaddition, there is a 40% chance the contract will pay an additional $3,000, depending on the outcome of theconsulting contract.Sanjeev used the most likely amount to determine transaction price. After Sanjeev has recognized revenue for twomonths of the contract, he changes his assessment of the chance the contract will pay him $3,000 up to 70%.How much revenue would Sanjeev recognize in the third month of the contract?$2,500O $1.500$1,850O $1,600

Variable consideration can be estimated under either of the below method a) The expected value…

Answered: Sanjeev enters into a contract that…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sanjeev enters into a contract offering variable consideration. The contract pays him $2, 200/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 concludes that this contract qualifies for revenue recognition over time. Assume Sanjeev estimates variable consideration as the expected value. What is the amount of revenue Sanjeev would recognize for the first month of the contract? Note: Do not round intermediate calculations. Round final answer to whole dollars. Multiple Choice $2, 600 $2, 200 $15,600 $1, 200
Sanjeev enters into a contract offering variable 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 concludes that this contract qualifies for revenue recognition over time. Assume that Sanjeev estimates variable consideration as the most likely amount. After Sanjeev has recognized revenue for two months of the contract, he changes his assessment of the chance the contract will pay him $3,000 to 70%. What adjustment to revenue should Sanjeev recognize to account for that change in estimate? A) Debit of $1,000 B) Debit of $334 C) Credit of $1,000 D) Credit of $334
Williams buys GH¢5000 worth of home furnishings from AGC Furniture. He pays GH¢500 down and agrees to pay the balance in monthly installments over 5 years at j12 = 18%. The contract stipulates a penalty in case of earlyrepayment, equal to 3 months’ payments. After 2 years, Williams realizes he can borrow from the bank at j12 = 12%. Should he refinance?
Jie purchased a computer priced at $891.06, financing it by paying $60.38 on the date of purchase, and signing a contract to pay equal monthly payments over the next fifteen months. If the terms of the contract state that interest is calculated at 11.9% compounded monthly, how much does Jie have to pay at the end of each month? Jie must make payments of $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
Ms. Demeanor had a new POS (point-of-sale) installed in her office. The balance owing on the contract is $23,500 which includes equipment and installation fees. The contract permits individual payments on the account whenever possible, but the final balance must be paid two years (24 months) from now. Starting today, interest will accumulate on the balance at 3.25% compounded monthly. Ms. Demeanor will make a payment of $5200 6 months from now and $6300 20 months from now. What is the final balance owing on the account in two years (24 months from now)? Practice drawing a timeline in your own notes.
Greenwell Farm Equipment sells a tractor to Farmer for $120,000 on January 1, 2025. The tractor is delivered that day. Greenwell agrees that the Farmer may delay the payment for 2 years. The market rate of interest is 6%. Refer to Greenwell Farms. How much interest revenue will Greenwell report over the life of this contract? (Do not round intermediary calculations, and round your final answer to the nearest whole number.) Use the formula approach.
GerrinAL sells five machines to VernAL for $500,000 per machine, the list price for the machines is $600,000. In a separate contract they sell maintenance services on the five machines for the first year. They charge $12,000 per machine for the maintenance, the list price for maintenance on the machine. As an incentive to sign the maintenance contract, GerrinAL gives VernAL a 25% discount on the purchase of machines in the next 75 days. No discounts are granted to other customers and they project there is 41% probability they will use the discount to purchase one machine with a stand-alone selling price of $600,000. What is the approximate contract consideration allocated to the discount? Select one: a. $150,000 b. $120,000 c. zero d. $50,000 e. $61,500
DITO Corp. a telecommunications operator, entered into a one-year contract with Kim on March 1, 20x7. In lined with the contract, Kim receives a free Apple I-phone handset from DITO, Kim will pay a monthly fee of P1,200. Kim gets the handset immediately after contract signature. DITO sells the same handset for P3,600 and the same monthly plans for P800 per month without handset. Allocate the transaction price to the performance obligations: the allocated transaction price to each performance obligations? a. None, since there is no contract b. P9,600 network service and P3,600 for Apple I-phone Handset c. P0 for network service and P13,200 for Apple I-phone Handset d. P10,473 network service and P3,927 for Apple I-phone Handset
HERE Inc, a telecommunications operator, entered into a contract with Mr. X on March 1, 20x7. In line with the contract, Mr. X subscribes for HERE’s monthly plan for 12 months and in return Mr. X receives a free cellphone from HERE. Mr. X will pay a monthly fee or P5,000. Mr. X gets the handset immediately after the contract signing.Here sells the same handset for P26,000 and the same monthly plans for P3,250 per month without the handset. Determine the revenue to be recognized by HERE on April 30, 20x7.
HERE Inc, a telecommunications operator, entered into a contract with Mr. X on March 1, 20x7. In line with the contract, Mr. X subscribes for HERE’s monthly plan for 12 months and in return Mr. X receives a free cellphone from HERE. Mr. X will pay a monthly fee or P5,000. Mr. X gets the handset immediately after the contract signing.Here sells the same handset for P26,000 and the same monthly plans for P3,250 per month without the handset. Determine the revenue to be recognized by HERE on March 31, 20x7.
Shoreline sells a piece of equipment to a corporate customer for $500,000. The cost of the equipment to Shoreline is $375,000. The terms of the sale call for the customer to make equal annual payments over the next three years, with the first payment due 1 year from now. APR is 9%. Variable consideration is already taken into account. Use the following tables to help you amortize and determine revenue and interest on the contract. Under the Installment method, how much gross profit will Shoreline recognize in Year 1? (to the nearest dollar) $0 $45,000 O $38,131 $97,774
Davenport Inc. offers a new employee two options. First, the employee can receive a one-time signing bonus at the date of employment. Second, the employee can take $26,000 at the date of employment and another $46,000 two years later. Assuming the employee's time value of money is 11% annually, what single payment in the first option would be equal to the total of the payments in the second option? (FV of $1, PV of $1, FVA of $1, and PVA of $1). (Use appropriate factor(s) from the tables provided.) Multiple Choice $25,000 $72,000 $67,102 $63,335

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