On June 1, 2018, Emmet Property Management Entered into a 2-Year

question 142

Multiple Choice

On June 1, 2018, Emmet Property Management entered into a 2-year contract to oversee leasing and maintenance for an apartment building. The contract starts on July 1, 2018. Under the terms of the contract, Emmet 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%. Emmet estimates a 30% chance it will exceed the occupancy threshold, and concludes the revenue recognition over time is appropriate for this contract.
- Assume Emmet estimates variable consideration as the most likely amount. How much revenue should Emmet recognize on this contract in 2018?

• A) $25,000
• B) $26,125
• C) $28,750
• D) $50,000

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Definitions:

Short-Run Aggregate-Supply Curve

A graphical representation that shows the relationship between the total production of goods and services and the price level for those goods and services in the short-term.

Price Level

An index that measures the average of current prices across the entire spectrum of goods and services produced in the economy compared to a reference point.

Output

The total quantity of goods and services produced by an economic system.

Short Run

A period in economics during which at least one input is fixed while others are variable, commonly used to analyze short-term decision-making.