Jones Corporation Enters into a Contract with Warner Video to Add

question 50

Multiple Choice

Jones Corporation enters into a contract with Warner Video to add their programs to Jones' network. Warner will pay Jones an upfront fixed fee of $250,000 for 12 months of access, and will also pay a $100,000 bonus if Jones' users access Warner Video for at least 10,000 hours during the 12 month period. Jones estimates that it has a 60% chance of earning the $100,000 bonus. Ignore any constraints on variable consideration. Refer to Jones Corporation. Using the expected-value approach, the transaction price would be ________.

• A) $150,000
• B) $250,000
• C) $310,000
• D) $350,000

Recognize the concept of promissory estoppel and its application.

Appreciate the principles underlying the formation of contracts including offer, acceptance, and consideration.

Describe the various elements involved in establishing a contract's legality, capacity, and obligation.

Understand the remedies available for breach of contract and contract disputes.

---

Definitions:

Statement of Cash Flows

A document that provides insight into how alterations in balance sheet items and earnings affect cash and cash-like assets, dissecting the analysis into operating, investing, and financing divisions.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was acquired and put into use.

Statement of Cash Flows

An accounting document that illustrates adjustments in balance sheet figures and their effect on cash and similar resources, dividing the analysis among operating, investing, and financing sectors.

Indirect Method

A cash flow statement approach that adjusts net income for non-cash transactions and changes in working capital.