INTERMEDIATE ACCOUNTING-MYACCOUNTINGLAB
3rd Edition
ISBN: 9780136946533
Author: GORDON
Publisher: PEARSON
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Textbook Question
Chapter 8, Problem 8.5BE
Estimating Variable Consideration. Gear Garage Inc. enters into a contract to provide services totaling $80,000. The contract includes a potential performance bonus based on when Gear Garage completes the services. Gear Garage estimates the following scenarios for completion. Determine the expected value of the bonus under each scenario. Ignore any constraints on variable consideration.
| Probability | ||||
| Complete within | Bonus | Scenario 1 | Scenario 2 | Scenario 3 |
| 3 days | $10,000 | 65% | 50% | 0% |
| 5 days | $ 6,000 | 10% | 40% | 90% |
| 8 days | $ 2,000 | 25% | 10% | 10% |
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Zentric Garage Inc. enters into a contract to provide services totaling $78,000. The contract includes a potential performance bonus
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Determine the bonus using the most-likely-amount approach.
Determine the bonus using the most-likely-amount approach under scenario 1.
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Determine the bonus using the most-likely-amount approach under scenario 3.
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Ente
Scenarios
Complete within
3 days
5 days
8 days
Probability
Bonus Scenario 1 Scenario 2
80%
47%
15%
38%
5%
15%
$ 13,000
$ 8,000
$ 3,500
Print Done…
Sandhill Construction enters into a contract witha customer to build a warehouse for $910000 on March 30, 2021 with a
performance bonus of $40000 if the building is completed by July 31, 2021. The bonus is reduced by $8000 each week that
completion is delayed. Sandhill commonly includes these completion bonuses in its contracts and, based on prior experience, estimates
the following completion outcomes:
Completed by
Probability
July 31, 2021
70%
August 7, 2021
20%
August 14, 2021
5%
August 21, 2021
5%
The transaction price for this transaction is
O $673400
O $946400
O $665400
O $910000
Oriole Construction enters into a contract with a customer to build a warehouse for $ 860000 on March 30, 2021 with a performance bonus of $ 60000 if the building is completed by July 31, 2021. The bonus is reduced by $ 12000 each week that completion is delayed. Oriole commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by
Probability
July 31, 2021
60%
August 7, 2021
30%
August 14, 2021
5%
August 21, 2021
5%
The transaction price for this transaction is
$ 913400
$ 557400
$ 860000
$ 569400
Chapter 8 Solutions
INTERMEDIATE ACCOUNTING-MYACCOUNTINGLAB
Ch. 8 - What are the primary issues involved in revenue...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - Prob. 8.4QCh. 8 - Prob. 8.5QCh. 8 - How is a performance obligation defined?Ch. 8 - What are the two criteria to define a good or...Ch. 8 - Prob. 8.8QCh. 8 - What principles regarding timing and measurement...Ch. 8 - Prob. 8.10Q
Ch. 8 - What is variable consideration and what factors...Ch. 8 - Describe and contrast the two approaches used to...Ch. 8 - Prob. 8.13QCh. 8 - What factors should accountants consider to...Ch. 8 - Prob. 8.15QCh. 8 - How does a seller account for any consideration...Ch. 8 - Prob. 8.17QCh. 8 - What are the two exceptions to the general rule...Ch. 8 - What are the three criteria required to recognize...Ch. 8 - When an entity does not meet the three criteria...Ch. 8 - Prob. 8.21QCh. 8 - Prob. 8.22QCh. 8 - How does a firm estimate the degree completed...Ch. 8 - Can a firm record inventory out on consignment as...Ch. 8 - What method do agents in a transaction use to...Ch. 8 - Prob. 8.26QCh. 8 - What qualitative disclosures do the standards...Ch. 8 - All of the following are elements of a contract...Ch. 8 - Prob. 8.2MCCh. 8 - Telecom Co. enters into a two-year contract with a...Ch. 8 - The transaction price must reflect the time value...Ch. 8 - Prob. 8.5MCCh. 8 - When allocating the transaction price to separate...Ch. 8 - Which of the following indicators is not...Ch. 8 - During Yoar 1 Moriwothor Construction Company...Ch. 8 - All of the following are indicators that the...Ch. 8 - Prob. 8.10MCCh. 8 - Prob. 8.11MCCh. 8 - Identify a Contract with a Customer. Complete the...Ch. 8 - Prob. 8.2BECh. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Estimating Variable Consideration. Gear Garage...Ch. 8 - Estimating Variable Consideration. Using the...Ch. 8 - Estimating Variable Consideration. Sellet...Ch. 8 - Estimating Variable Consideration. Seliet...Ch. 8 - Prob. 8.9BECh. 8 - Allocation of Transaction Price. Martin Software...Ch. 8 - Prob. 8.11BECh. 8 - Allocation of Transaction Price. Sycamore Sidewalk...Ch. 8 - Allocation of Transaction Price. Sycamore enters...Ch. 8 - Prob. 8.14BECh. 8 - Allocation of Transaction Price. Using the...Ch. 8 - When to Recognize Revenue. For each scenario...Ch. 8 - Prob. 8.17BECh. 8 - Prob. 8.18BECh. 8 - Prob. 8.19BECh. 8 - Prob. 8.20BECh. 8 - Sales with the Right of Return. Both incorporated...Ch. 8 - Sales with the Right of Return. Using the...Ch. 8 - Sales Returns. Historically, about 5% or the...Ch. 8 - Sales on Consignment. Hanna Lighting recertify...Ch. 8 - Determining Performance Obligations. Pagit Inc, a...Ch. 8 - Prob. 8.2ECh. 8 - Estimating Variable Consideration. King Rat Pest...Ch. 8 - Prob. 8.4ECh. 8 - Prob. 8.5ECh. 8 - Prob. 8.6ECh. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Prob. 8.9ECh. 8 - Prob. 8.10ECh. 8 - Determination of When to Recognize Revenue. Far...Ch. 8 - Prob. 8.12ECh. 8 - Prob. 8.13ECh. 8 - Prob. 8.14ECh. 8 - Prob. 8.15ECh. 8 - Prob. 8.16ECh. 8 - Prob. 8.17ECh. 8 - Prob. 8.18ECh. 8 - Prob. 8.19ECh. 8 - Other Principal Agent Transactions, Net Revenue...Ch. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Comprehensive Revenue Recognition Problem. Casale...Ch. 8 - Prob. 8.4PCh. 8 - Determining When to Recognize Revenue. Megrew...Ch. 8 - Prob. 8.6PCh. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.10PCh. 8 - Prob. 8.11PCh. 8 - Prob. 8.12PCh. 8 - Prob. 1JCCh. 8 - Prob. 1FSCCh. 8 - Prob. 2FSCCh. 8 - Prob. 1SSCCh. 8 - Prob. 1BCC
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Revenue recognition explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=816Q6pOaGv4;License: Standard Youtube License