Question

I got the wrong answer and I'm not sure why. What I did was:

Pharoah's Agency sells an insurance policy offered by Capital Insurance Company for a commission of $109 on January 2, 2020. In addition, Pharoah will receive an additional commission of $11 each year for as long as the policyholder does not cancel the policy. After selling the policy, Pharoah does not have any remaining performance obligations. Based on Pharoah's significant experience with these types of policies, it estimates that policyholders on average renew the policy for 4.5 years. It has no evidence to suggest that previous policyholder behavior will change. X Your answer is incorrect. Try again. Determine the transaction price of the arrangement for Pharoah, assuming 95 policies are sold. Transaction price 15057.50 LINK TO TEXT X your answer is incorrect. Try again. Determine the revenue that Pharoah will recognize in 2020. (Round answer to O decimal places, e.g. 5,125.) Revenue - 3346 33

Transaction price= ($109*95)+($11*95*4.5)=$15,057.50

Revenue recognized in 2020= ($15,057.50 / 4.5 =$3,346

I tried it rounding the transaction price to $15,058 and it was also wrong. Please show work, thank you!

Answer 1

Refer a below image for the above asked question, in a detailed way of solution. And actually your done a correct answer only.

solution : Requirement : Determine arrangement the for transaction price of pharoah, assoming 95 the policies are - soldi * Pharoah determines that the transaction price for the 95 policies is $1505705 [ie, ($109 commission X 95 policies) + (8 11 additional commission X 4.5 years & g5 polacs) , [ & 10355 + $4702.5 = $150575] that Pharoah Rea oirement will Determine recognize the revenue in 2020 : * Towntrola VII Pharoah will recognize revenue of $3346. [ie, & 1505795 x 12] - 54 Because on average customers renew for 4.5 years, pharoah includes that amount in its estimate for the fansaction price As circonstances change, Pharoah updates its estimate of the transaction price and recognizes revenue (or a reduction of revenue) for those changes in circoms tances.