Roche Pharmaceuticals entered into a licensing agreement with Zenith Lab for a new drug under development. Roche will receive $6,750,000, if the new drug receives FDA approval. Based on prior approval, Roche determines that it is 85% likely that the drug will gain approval. The transaction price of this arrangement should be
(a) $0 until approval is received
(b) $6,750,000
(c) $1,012,500
(d) $5,737,500
Arizona Communications contracted to set up a call center for the City of Phoenix. Underthe terms of the contract, Arizona Communications will design and set-up a call center withthe following costs
Design of call center $10,000
Computers, servers, telephone equipment $275,000
Software $85,000
Installation and testing of equipment $15,000
Selling commission $25,000
Annual service contract $50,000
In addition, Arizona Communications will maintain and service the equipment and softwareto ensure smooth operations of the call center for an annual fee of $90,000. Ownership ofequipment installed remains with the City of Phoenix. The contract costs that should becapitalized is
a.$460,000
b.$410,000
c.$360,000
d.$370,000
A company has satisfied its performance obligation when the
a. company has received payment for goods or services.
b. company has significant risks and rewards of ownership.
c. company has legal title to the asset.
d. company has transferred physical possession of the asset.