Question

tbs.res.revrecog.contra.mod.001_0318 4 RETURN TO YOUR ANSWER . On February 21, 20X1, Questions Inc. signed a contract with Testing 123 Corp. The initial terms of the contract require Questions Inc.to to write 100 questions for Testing 123 Corp's National testing review course. In return, Testing 123 Corp will pay Questions Inc. $25 per question. On March 12, 20X1, after Questions Inc. has submitted 75 questions, both parties agreed to a change in the contract terms. The new terms provide that Questions Inc. will provide an additional 50 questions for $30 per question. Which section of the authoritative literature addresses the amount of revenue that Questions Inc. should recognize for the remaining questions to be submitted? Enter your response in the answer fields below. Guidance on correctly structuring your response appears above and below the answer fields. Enter your response in the answer fields below. Guidance on correctly structuring your response appears above and below the answer fields. FASB ASC 606 10 25 12

The 606-10-25-12 is the correct answer. However, I am really confused for how to get it.

For example, what should I do to calculate to get the answer 606?

Answer 1

Dear Student,

The answer 606-10-25-12 need not be calculated , as it represents the Standard and paragraph number and not the calculations for the amounts mentioned in the question.

The question has been asked to quote the section number and the ASC that deals with the issue described in the question scenario. And the ans to this is that , the revenue for the said scenario shall be recognised in accordance with FASB ASC 606 - Revenue from contracts with customers. And paragraph 606-10-25-12 provides for the detailed provision for revenue recognition in such cases.

Please refer below paragraph FASB ASC 606-10-25-12 in detail for your reference and understanding:

Revenue from Contracts with Customers
Recognition
Contract Modifications
606-10-25-12
An entity shall account for a contract modification as a separate contract if both of the following
conditions are present:
a. The scope of the contract increases because of the addition of promised goods or services that
are distinct (in accordance with paragraphs 606-10-25-18 through 25-22).
b. The price of the contract increases by an amount of consideration that reflects the entity’s
standalone selling prices of the additional promised goods or services and any appropriate adjustments to that price to reflect the circumstances of the particular contract.

For example, an entity may adjust the standalone selling price of an additional good or service for a discount that the customer receives, because it is not necessary for the entity to incur the selling-related costs that it would incur when selling a similar good or service to a new customer.