Question

Allocating a transaction price to multiple performance obligations includes which of the following steps: a.Consolidate the components of the contract to two performance obligations because a contract should not have more than two performance obligations. b.Obtain an independent appraisal of the value of services identified as a performance obligation. c.Identify distinct goods and/or services as separate performance obligations. d.Complete each performance obligation before recognizing any revenue from the contract.

Answer 1

Answer:

C) Identify distinct goods and/or services as separate performance obligations.

Explanation:

This refers to allocating different prices to several related activities that are part of one single large project or transaction. When you do this, you must specify which parts, goods or services you will require and at what specific prices. E.g. you agree to purchase uniforms for a football team, you will pay X amount when the helmets are delivered, another amount for the shoes and finally an amount for the uniform. The school will pay as the different products are delivered.