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1 August, 13:59

Lewis is selling a product with some of the transaction price depending on the outcome of a future event. There is a 75% chance that the event will result in $100,000 of consideration to Lewis, and a 25% chance that the event will result in $40,000 of consideration to Lewis. Which of the following is not an appropriate estimate of the amount of uncertain consideration for purposes of Lewis estimating the transaction price?

A) $100,000.

B) $85,000.

C) $70,000.

D) a-c are all appropriate estimates.

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  1. 1 August, 14:05
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    correct option is C) $70,000.

    Explanation:

    given data

    chance event = 75%

    result of consideration to Lewis = $100,000

    chance event = 25%

    result of consideration to Lewis = $40,000

    solution

    we get here amount of uncertain consideration that is

    amount = (75% x $100,000) + (25% x $40,000)

    amount = $85000

    so that answer b that likely amount is $100,000 but here we have not an appropriate estimate of the amount is $C) $70,000
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