Sanjeev Enters into a Contract Offering Variable Consideration

question 172

Multiple Choice

Sanjeev enters into a contract offering variable consideration. The contract pays him $1,000/month for six months of continuous consulting services. In addition, there is a 60% chance the contract will pay an additional $2,000 and a 40% chance the contract will pay an additional $3,000, depending on the outcome of the consulting contract. Sanjeev concludes that this contract qualifies for revenue recognition over time.
-Assume Sanjeev estimates variable consideration as the expected value. What is the amount of revenue Sanjeev would recognize for the first month of the contract?

• A) $1,000
• B) $1,333
• C) $1,400
• D) $1,200

---

Definitions:

Harm-Reduction Approach

A strategy aimed at minimizing the negative health, social, and legal impacts associated with various human behaviors, without necessarily eliminating the behaviors.

Sponsorship

The provision of support, resources, or funding to an individual or event by an organization or individual, often for promotional purposes.

Contingency Management

A behavior modification technique that rewards positive behavior or punishes negative behavior to enhance motivation and encourage changes in behavior.