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Determine the transaction price of the arrangement for teal

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Reference no: EM132521993

Question - Teal's Agency sells an insurance policy offered by Capital Insurance Company for a commission of $99 on January 2, 2017. Teal will receive an additional commission of $9 each year for as long as the policyholder does not cancel the policy. After selling the policy, Teal does not have any remaining performance obligations. Based on Teal's significant experience with these types of policies, it estimates that policyholders on average renew the policy for 4.5 years after the first year before terminating their insurance policy. It has no evidence to suggest that previous policyholder behavior will change.

Required -

1. Determine the transaction price of the arrangement for Teal, assuming 90 policies are sold.

2. Determine the revenue that Teal will recognize in 2017.

Reference no: EM132521993

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