Question

Assume Thomas uses the expected value as its estimate of variable consideration, but is very uncertain of that estimate due to a lack of experience with similar consulting arrangements. Calculate the transaction price.

Answer 1

Answer: $64,800

Explanation:

The expected is calculated as follows:

Expected amount

$88,000 ($59,000 fixed fee + 29,000 bonus)×20% =$17,600$59,000

($59,000 fixed fee + 0 bonus)×80% =47,200

Expected contract price at inception$64,800Or