Question

The residual approach to allocate transaction prices to multiple performance obligations in a contract is appropriate when:

Multiple Choice

• None of the goods and services included in the contract are not sold on a stand-alone basis.

• None of the answer choices are correct.

• The stand-alone price of all of the goods or services is known.

• The stand-along price of one or more of the goods or services is highly variable or uncertain.

3. A patient of Dr. Jones presents his Medicare card after his appointment. The total charge for the services was $100; however, Medicare will pay only $60 for this service and the patient is to pay $20. Acceptance of the patient’s Medicare insurance creates a contract:

Multiple Choice

• for payment of $60 and a price concession of $40.

• for $20 and an $80 discount or price concession.

• for payment of $100, regardless of what Medicare will pay.

• for payment of $80 and a $20 discount or price concession.

Answer 1

1. The residual approach to allocate transaction prices to multiple performance obligations in a contract is appropriate when-

ANS: None of the goods and services included in the contract are not sold on a stand-alone basis.

3.   A patient of Dr. Jones presents his Medicare card after his appointment. The total charge for the services was $100; however, Medicare will pay only $60 for this service and the patient is to pay $20. Acceptance of the patient’s Medicare insurance creates a contract:-

ANS. For payment of $80 and a $20 discount or price concession.