Final answer:
Allocation of the transaction price to performance obligations in business is based on relative standalone selling prices and cannot be based on estimated selling prices. The allocation method may not use the residual method when selling prices are uncertain and is not allowed when bad debts are material.
Step-by-step explanation:
The subject of this question is Business and the grade level is College.
Allocation of the transaction price to performance obligations in business is based on relative standalone selling prices. This means that the transaction price is divided among the different performance obligations based on the prices at which they could be sold individually. It is important to note that the allocation cannot be based on estimated selling prices and may not use the residual method when selling prices are uncertain. Additionally, allocation of the transaction price may not be allowed when bad debts are material.