91Ó°ÊÓ

Transaction cost is the amount an organization receives from billed customers for transferring a promised product or service. This transaction value must be pre-determined and agreed upon by both parties.

Management's estimate of the amount of consideration to which the entity will be entitled should be included in the transaction price. Probability-weighted technique is the best predictive way for estimating the variable under examination, given the different possibilities and probabilities available based on experience. In this instance:

The contract price for 10 speedboats = $400,000

The likelihood for each outcome = 25%

In the first situation:

Bonus payment till 1 February = $21,000

If boats are delivered by February 1, 2018, the chance of getting $421,000.

$\begin{array}{rcl}\mathrm{Variable}\mathrm{consideration}1& =& \mathrm{Likelihood}\mathrm{for}\mathrm{outcome}×\mathrm{Contract}\mathrm{price}+\mathrm{Bonus}\mathrm{payment}\\ & =& 25\%×\$400,000+\$21,000\\ & =& \frac{25}{100}×\$421,000\\ & =& \$105,200\end{array}$

In the second situation:

Bonus payment till 8 February = $14,000

If boats are delivered by February 8, 2018, the chance of getting $414,000

$\begin{array}{rcl}\mathrm{Variable}\mathrm{Consideration}2& =& \mathrm{Likelihood}\mathrm{for}\mathrm{outcome}×\mathrm{Contract}\mathrm{price}+\mathrm{Bonus}\mathrm{payment}\\ & =& 25\%×\$400,000+\$14,000\\ & =& \frac{25}{100}×\$414,000\\ & =& \$103,500\end{array}$

In the third situation:

Bonus payment till 15 February = $7,000

If boats are delivered by February 15, 2018, the chance of getting $407,000.

$\begin{array}{rcl}\mathrm{Variable}\mathrm{consideration}3& =& \mathrm{Likelihood}\mathrm{for}\mathrm{outcome}×\mathrm{Contract}\mathrm{price}+\mathrm{Bonus}\mathrm{payment}\\ & =& 25\%×\$400,000+\$7,000\\ & =& \frac{25}{100}×\$407,000\\ & =& \$101,750\end{array}$

In the fourth situation:

Bonus payment after 15 February = $ 0

If boats are delivered after February 15, 2018, the chance of getting $400,000

$\begin{array}{rcl}\mathrm{Variable}\mathrm{consideration}4& =& \mathrm{Likelihood}\mathrm{for}\mathrm{outcome}×\mathrm{Contract}\mathrm{price}+\mathrm{Bonus}\mathrm{payment}\\ & =& 25\%×\$400,000+\$0\\ & =& \frac{25}{100}×\$400,000\\ & =& \$100,000\end{array}$

$\begin{array}{rcl}\mathrm{Total}\mathrm{transaction}\mathrm{price}& =& \mathrm{VC}1+\mathrm{VC}2+\mathrm{VC}3+\mathrm{VC}4\\ & =& \$105,250+\$103,500+\$101,750+\$100,000\\ & =& \$410,500\end{array}$

Based on probability-weighted estimate, the total transaction price is $410,500.