Using the guidance from ASC 606, calculate the variable price for each of the following contracts with customers. Also, identify the method used and the rationale.Customer A:Customer B:PossibilityProbability (%)Price (USD)PossibilityProbability (%)Price (USD)A5026.50A5526.50B2024.00B4524.00C2025.25 D1028.00

Answered: Using the guidance from ASC 606,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Using the guidance from ASC 606, calculate the variable price for each of the following contracts with customers. Also, identify the method used and the rationale.

Customer A:	Customer B:
Possibility	Probability (%)	Price (USD)	Possibility	Probability (%)	Price (USD)
A	50	26.50	A	55	26.50
B	20	24.00	B	45	24.00
C	20	25.25
D	10	28.00

Expert Solution

Step 1

As per the ASC 606 i.e. Revenue from contract with customer which is based on 5 Step Model.

Identify the contract with customer
Identify the performance obligation that needs to be satisfied.
Determine the transaction price.
Allocate the transaction price to the performance obligation
Recognize the revenue when performance obligation satisfied.

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