Allocate Transaction Price To Performance Obligations Practice Test

A private, for-profit marketing agency enters into a contract to provide (1) a brand strategy deliverable and (2) a six-month digital campaign management service. The customer pays a fixed $80,000 plus a $20,000 success fee if specified lead-generation targets are met; the agency estimates the expected value of the success fee to be $12,000 and concludes it is not constrained, so it includes $12,000 in the transaction price. The observable standalone selling prices are $50,000 for brand strategy and $50,000 for campaign management. How should the entity allocate the transaction price?

A private, for-profit biotech company enters into a contract to provide (1) a research report and (2) a license to use certain data for two years. The customer agrees to pay $60,000 in cash and transfer publicly traded shares with a fair value at contract inception of $40,000; the observable standalone selling prices are $70,000 for the research report and $50,000 for the data license, and the entity measures non-cash consideration at fair value under ASC 606. How should non-cash consideration be valued for allocation and how should the entity allocate the transaction price?