| d. The good or service is part of an interrelated bundle. | 3.If a payment from a customer is variable (rather than fixed), the transaction price should be based on the: | a. expected (probability-weighted) outcome. | | | | b. expected (probability-weighted) outcome or most likely outcome, depending on which answer best predicts consideration ultimately received (in management's judgment). | | | | | d. expected (probability-weighted) outcome or most likely outcome, depending on which answer gives the most conservative measure of the consideration to be ultimately received. | 4.Which of the following statements about variable consideration is true? | a. Noncash consideration may be ignored. | | | | b. A company is constrained from recognizing variable consideration early when the consideration is highly uncertain and largely beyond management's control. | | | | c. The time value of money may be ignored for long-term contracts. | | | | d. The transaction price should be reduced by an estimated loss from customer credit risk. | 5.Step 4 of the revenue recognition process requires the allocation of the transaction price to separate performance obligations in the contract based on their relative fair values. Approaches to estimate fair value are the (1) residual approach, (2) stand-alone selling price, (3) expected cost plus margin approach, and (4) adjusted market assessment approach. What is the preference ordering of the alternative approaches? | | |