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Murkey Consultants provided Lamba Construction with assistance in implementing various cost-savings initiatives. Murkey’s contract specifies that...

Murkey Consultants provided Lamba Construction with assistance in implementing various cost-savings initiatives. Murkey’s contract specifies that it will receive a flat fee of $100,000 and an additional $40,000 if Lamba reaches a prespecified target amount of cost savings. Murkey estimates that there is a 20% chance that Lamba will achieve the cost-savings target.

Required:

  1. Assuming Murkey uses the expected value as its estimate of variable consideration, calculate the transaction price.
  2. Assuming Murkey uses the most likely value as its estimate of variable consideration, calculate the transaction price.
  3. Assume Murkey uses the expected value as its estimate of variable consideration, but is very uncertain of that estimate due to a lack of experience with similar consulting arrangements. Calculate the transaction price.

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ekkarill92 answered 1 year ago
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