Question 1

Under ASC 606, a construction company enters into a contract to build a warehouse for $2,000,000. The contract includes a $200,000 bonus if completed by year-end. The company estimates there is a 70% chance of meeting the deadline (bonus received) and a 30% chance of missing it (no bonus). The company has limited experience with similar contracts.

Using the most likely amount method, what is the transaction price?

Accepted Answer

Identify the method required: 'Most Likely Amount'. This is the single outcome with the highest probability. (Binary: Win or Lose).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using expected value method when most likely amount is requested.

How to approach this question

Full Answer

Common mistakes

Practice the full CPA BAR Practice Exam 4

More questions from this exam