Sanjeev enters into a contract offering variable consideration. The contract pays him $1,000/month for six months of continuous consulting services. In addition, there is a 60% chance the contract will pay an additional $2,000 and a 40% chance the contract will pay an additional $3,000, depending on the outcome of the consulting contract. Sanjeev concludes that this contract qualifies for revenue recognition over time.

Assume Sanjeev estimates variable consideration as the most likely amount. What is the amount of revenue Sanjeev would recognize for the first month of the contract?

(The most likely outcome is that Sanjeev receives the $2,000 bonus (likelihood = 60%), in which case Sanjeev would be paid a total of ($1,000 6 months) + $2,000, or $8,000. Therefore, Sanjeev would recognize $8,000 6 = $1,333 each month.)