Reference no: EM131262316
Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketing strategy to compete with Burger King. The contract spans eight months. Burger Boy promises to pay $36,000 at the beginning of each month. At the end of the contract, Velocity either will give Burger Boy a refund of $12,000 or will be entitled to an additional $12,000 bonus, depending on whether sales at Burger Boy at year-end have increased to a target level. At the inception of the contract, Velocity estimates an 80% chance that it will earn the $12,000 bonus and calculates the contract price based on the expected value of future payments to be received. After four months, circumstances change, and Velocity revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Velocity receives the additional consideration of $12,000.
Prepare the journal entries related to the contract. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1. Prepare the entry to record revenue each month for the first four months of the contract.
2. Prepare the entry after four months to recognize the change in estimate associated with the reduced likelihood that the $12,000 bonus will be received.
3. Prepare the entry to record revenue each month for the second four months of the contract.
4. Prepare the entry after eight months to record receipt of the $12,000 bonus.
|
How much must carla invest today
: Carla Monroe wants to create a fund today that will enable her to withdraw $31,300 per year for 6 years, with the first withdrawal to take place 5 years from today. Click here to view factor tables If the fund earns 11% interest, how much must Carla ..
|
|
Use tax formulas to compute albertss net tax payable
: Martin received $120,000 in salary from Red Steel Corporation, where he is a construction engineer. Withholding for Federal income tax was $10,750. The amounts withheld for FICA taxes were as follows: $7,049 ($113,700 × 6.2%) for Social Security and ..
|
|
Heading for columns-cash-accounts receivable-office supplies
: Neva Nadal started a new business, Nadal Computing, and completed the following transactions during its first year of operations. Neva Nadal invests $90,000 cash and office equipment valued at $10,000 in the company. The company purchased a $150,000 ..
|
|
Prepare the entry after eight months to record receipt
: Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketing strategy to compete with Burger King. The contract spans eight months. Burger Boy promises to pay $36,000 at the beginning of each mont..
|
|
Compounded monthly to meet her retirement goal
: Jennifer is the owner of a video game and entertainment software retail store. She is currently planning to retire in 30 years and wishes to withdraw $10,000/month for 20 years from her retirement account starting at that time. How much must she cont..
|
|
What will be the size of each installment
: Yumi's grandparents presented her with a gift of $20,000 when she was 12 years old to be used for her college education. Over the next 5 years, until she turned 17, Yumi's parents had invested her money in a tax-free account that had yielded interest..
|
|
What should be the size of each repayment
: The Flemings secured a bank loan of $384,000 to help finance the purchase of a house. The bank charges interest at a rate of 3%/year on the unpaid balance, and interest computations are made at the end of each month. The Flemings have agreed to repay..
|
|
Calculate the correct ending balance of cash
: On October 31, 2018, Damon Company’s general ledger shows a checking account balance of $8,436. The company’s cash receipts for the month total $74,580, of which $71,360 has been deposited in the bank. Prepare a bank reconciliation to calculate the c..
|