Coronado’s Agency sells an insurance policy offered by CapitalInsurance Company for a commission of $103...

Coronado’s Agency sells an insurance policy offered by Capital Insurance Company for a commission of $103 on January 2, 2020. In addition, Coronado will receive an additional commission of $12 each year for as long as the policyholder does not cancel the policy. After selling the policy, Coronado does not have any remaining performance obligations. Based on Coronado’s significant experience with these types of policies, it estimates that policyholders on average renew the policy for 4.5 years. It has no evidence to suggest that previous policyholder behavior will change Determine the transaction price of the arrangement for Coronado, assuming 75 policies are sold.

Expert Solution

Compute the transaction price of the arrangement as follows

Particulars	Amount ($)
*Commission on sale of insurance policy ($103 75)**	$7725
*additional commission ($12 75 * 4.5)**	$4050
Transaction price for the arrangements	$11775

Therefore, transaction price for the arrangement is $11775

ekkarill92 answered 2 years ago

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