Assume That Sanjeev Estimates Variable Consideration as the Most Likely

question 150

Multiple Choice

Assume that Sanjeev estimates variable consideration as the most likely amount.After Sanjeev has recognized revenue for two months of the contract,he changes his assessment of the chance the contract will pay him $3,000 to 70%.What adjustment to revenue should Sanjeev recognize to account for that change in estimate?

• A)Debit of $1,000
• B)Debit of $334
• C)Credit of $1,000
• D)Credit of $334

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Definitions:

Capital Lease

A lease agreement that is classified as a purchase by the lessee for accounting purposes, effectively treating the leased asset as owned property.

Executory Costs

Costs related to the unperformed obligations under a lease, typically including insurance, maintenance, and taxes.

Minimum Lease Payments

The lowest amount that a lessee is obligated to pay over the lease term for the right to use an asset.

Rental Payments

Periodic payments made by a lessee to a lessor for the use of a property, vehicle, or equipment.