Question

5. On June 1, 2021, Coors Property Management entered into a 2-year contract to oversee leasing and maintenance for an apartment building. The contract starts on July 1, 2021. Under the terms of the contract, Coors 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%. Coors estimates a 30% chance it will exceed the occupancy threshold, and concludes that revenue recognition over time is appropriate for this contract. Assume Coors estimates variable consideration as the expected value. How much revenue should Coorsrecognize on this contract in 2021?

A) $25,000

B) $26,125

C) $28,750

D) $50,000

Answer 1

solutions Given data, fired fee & 50000 per year Received an additional is'y of the fixed fee at the end of the year provided that bielding occupanc erceeds 90%. possible amount poobability expected amount : To% SO 000 50000+ SORDOX 157) - S1500 30% 35000 $ 17250 Annual expected 52250 transaction price = $52250. Revenue to be recognized in 2081 * $ 52250 x .. 3 $ 26125 Option 'B' is correct.