Question
Brunetti Co. designed and installed customized signs for Di Antonio CPA, Inc. Brunetti's contract specifies that it will receive a flat fee of $150,000 for
Brunetti Co. designed and installed customized signs for Di Antonio CPA, Inc. Brunetti's contract specifies that it will receive a flat fee of $150,000 for providing the customized signs, and an additional $10,000 if 30% of Di Antonio's new customers indicate they first learned of Di Antonio because of the signs. Based on historical experience, Brunetti estimates that there is a 90% chance it will achieve the threshold to receive a bonus.
Required:
(a) Assuming Brunetti uses the most likely value to estimate the variable consideration, calculate the transaction price.
(b) Assuming Brunetti determines transaction price as the "expected value" of the variable consideration, calculate the transaction price.
(c ) Assume Brunetti uses the expected value approach, but is very uncertain of that estimate due to a lack of experience with similar arrangements. What would be the appropriate transaction price?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started