Swifty’s Agency sells an insurance policy offered by Capital Insurance Company for a commission of $90 on January 2, 2020. In addition, Swifty will receive an additional commission of $8 each year for as long as the policyholder does not cancel the policy. After selling the policy, Swifty does not have any remaining performance obligations. Based on Swifty’s significant experience with these types of policies, it estimates that policyholders on average renew the policy for 4.5 years, which results in an expected policy life of 5.5 years. It has no evidence to suggest that previous policyholder behavior will change. (a)Determine the transaction price of the arrangement for Swifty, assuming 120 policies are sold. (Round answer to 0 decimal places, e.g. 5,125.) Transaction price $ (b) Determine the revenue that Swifty will recognize in 2020
Swifty’s Agency sells an insurance policy offered by Capital Insurance Company for a commission of $90 on January 2, 2020. In addition, Swifty will receive an additional commission of $8 each year for as long as the policyholder does not cancel the policy. After selling the policy, Swifty does not have any remaining performance obligations. Based on Swifty’s significant experience with these types of policies, it estimates that policyholders on average renew the policy for 4.5 years, which results in an expected policy life of 5.5 years. It has no evidence to suggest that previous policyholder behavior will change. (a)Determine the transaction price of the arrangement for Swifty, assuming 120 policies are sold. (Round answer to 0 decimal places, e.g. 5,125.) Transaction price $ (b) Determine the revenue that Swifty will recognize in 2020
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter19: Accounting For Post Retirement Benefits
Section: Chapter Questions
Problem 7P
Related questions
Question
Swifty’s Agency sells an insurance policy offered by Capital Insurance Company for a commission of $90 on January 2, 2020. In addition, Swifty will receive an additional commission of $8 each year for as long as the policyholder does not cancel the policy. After selling the policy, Swifty does not have any remaining performance obligations. Based on Swifty’s significant experience with these types of policies, it estimates that policyholders on average renew the policy for 4.5 years, which results in an expected policy life of 5.5 years. It has no evidence to suggest that previous policyholder behavior will change.
(a)Determine the transaction price of the arrangement for Swifty, assuming 120 policies are sold. (Round answer to 0 decimal places, e.g. 5,125.)
| Transaction price | $ |
(b) Determine the revenue that Swifty will recognize in 2020
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT