FASB ASC 606, commonly referred to as the revenue recognition standard, includes all of the following in its five step process to recognize revenue except:

a) identify the contract with the customer

b) identify the performance obligations in the contract

c) allocate the transaction price to the performance and obligantions in the contract

d) recognize revenue when (or as) the entity is paid for a performance obligation

The following information is available about a signed agreement between two entities: The entities have agreed to specific performance obligations. The entities have agreed on a price related to the performance obligations. No work has begun on the performance obligations and the contract is cancelable without payment of penalty or other consideration. It is probable that the company completing the work will collect the agreed upon consideration. Does a contract exist between the entities to which the revenue recognition criteria may be applied?

a)A contract to which the revenue recognition criteria applies does not exist because the transaction price has not yet been allocated to the specific performance obligations.

b)A contract to which the revenue recognition criteria applies does not exist because it is cancelable without penalty and no work on the performance obligations has begun.

c)A contract to which the revenue recognition criteria applies exists because it identifies specific performance obligations and collectibility of the consideration is probable.

d)A contract to which the revenue recognition criteria applies exists because the contract includes important terms such as the agreed upon price and specific performance obligations.