Hi,
I'm studying for the CPA and I faced this problem. could you please explain it to me? I will be thankful if you do.
I'm sorry I don't have an Arabic keyboard.
On June 1, 2016, Linli Property Management entered into a 2-year contract to oversee leasing and maintenance for an apartment building. The contract starts on July 1, 2016. Under the terms of the contract, Linli will be paid a fixed fee of $50,000 per year and will receive an additional 15% of the fixed fee at the end of each year provided that building occupancy exceeds 90%. Linli estimates a 30% chance it will exceed the occupancy threshold, and concludes the revenue recognition over time is appropriate for this contract.
1. Assume Linli estimates variable consideration as the expected value. How much revenue should Linli recognize on this contract in 2016? Explain Plz
2. Assume Linli estimates variable consideration as the most likely amount. How much revenue should Linli recognize on this contract in 2016?Explain Plz
3. Assume that Linli accrues revenue each month, and estimates variable consideration as the most likely amount. On November 1, Linli revises its estimate of the chance the building will exceed the 90% occupancy threshold to a 70% chance. What is the total amount of revenue Linli should recognize on this contract in November of 2016? Explain Plz .
Thanks,
Muhannad
