Question

Lewis is selling a product with some of the transaction price depending on the outcome of a future event. There is a 75% chance that the event will result in $100,000 of consideration to Lewis, and a 25% chance that the event will result in $40,000 of consideration to Lewis. Which of the following is not an appropriate estimate of the amount of uncertain consideration for purposes of Lewis estimating the transaction price?
A) $100,000.
B) $85,000.
C) $70,000.
D) a-c are all appropriate estimates.

Answer 1

Answer:

correct option is C) $70,000.

Explanation:

given data

chance event  =75%

result of consideration to Lewis = $100,000

chance event  =25%

result of consideration to Lewis = $40,000

solution

we get here amount of uncertain consideration that is

amount = (75% x $100,000) + (25% x $40,000)

amount = $85000

so that answer b that likely amount is $100,000 but here we have not an appropriate estimate of the amount is $C) $70,000