Sanjeev enters into a contract offering variable consideration. The contract pay

Question

Sanjeev enters into a contract offering variable consideration. The contract pays, him $1, 000/month for six months of continuous consulting services. In addition, there is a 60% chance he contract will pay an additional $2,000 and a 40% chance the contra 't pay an additional $3,000, depending on the outcome of the consulting contract. Sanjeev concludes that this contract qualifies for revenue recognition over time. Assume Sanjeev estimates variable consideration as the most likely amount What is the amount of revenue Sanjeev would recognize for the first month of the contract?

Explanation / Answer

since the likelihood of receiving bonus of 60% is more hence Sanjeev will recognise

= 1000*6    + $2000

= $8,000/6

= $1333 per month

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