2. Which of the following is an example of a variable consideration? A) John exp

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2. Which of the following is an example of a variable consideration? A) John expected to receive $100 for his tutoring services if he keeps track of his hours. B) Melody's Piano will paid for the 50 pianos sold if the pianos are non-defective after the customer takes control. auntan erous Computers are pay a base amount for every repair plus an additional hourly fee of $10. D) Excellent Electronics has a 10% mail-in rebate program for the Model X-001 speaker system. Sold $ 10,000 worth of systems and believes there is a 50% chance that rebates will redeemed. 3. On April 1St, Bob the Builder entered into a contract of one-month duration to build a barn for Nolan. Bob guaranteed to receive a base fee of $5,000 for his services in addition to a bonus depending on when the project is completed. Nolan created incentives for Bob to finish the barn as soon as he can without jeopardizing the structural integrity of the barn. Nolan offered to pay an additional 30% of the base fee if the project finished 2 weeks early and 10%, if the project finished a week early. The probability of finishing 2 weeks early is 30% and the probability of finishing a week early is 60%. What is the expected transaction price with variable consideration estimated as the expected value? A) $4,750 B) $5,000 C) $5,500 D) $5,750 On April 1st, Bob the Builder entered into a contract of one-month duration to build a barn for Nolan. Bob guaranteed to receive a base fee of $5,000 for his services in addition to a bonus depending on when the project is completed. Nolan created incentives for Bob 4. to finish the barn as soon as he can without jeopardizing the structural integrity of the barn. Nolan offered to pay an additional 30% of the base fee if the project finished 2 weeks early and 10%, if the project finished a week early. The probability of finishing 2 weeks early is 30% and the probability of finishing a week early is 60%. What is the expected transaction price with variable consideration estimated as the most likely amount? A) $4,750 B) 5,000 C) $5,500 D) $5,750

Explanation / Answer

Variable consideration can be in many forms, like price concessions, rebates or refunds. A consideration is considered variable if the amount receivable is dependent on occurring or not occurring of a future event, although the amount may be fixed.
From the given cases, case D seems to be an example of Variable consideration because it has a rebate which has a 50% chance of redemption.
Hence the correct answer is D.

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