Sherlock Associates enters into a contract dated July 1 to provide consulting services to Baker University (BU). The anticipated term of the contract is four months and the purpose of the contract is to achieve significant cost savings at the university. There is a stipulation in the contract that BU will pay Sherlock $38,000 at the end of each month, and if total cost savings reach a specific target, BU will pay an additional $33,000 to Sherlock at the end of the contract. Sherlock estimates a 80% chance that cost savings will reach the target. Note: Sherlock estimates variable consideration as the expected value. Required: Prepare the journal entry on July 31 to record the first month of revenue under the contract. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

Sherlock Associates enters into a contract dated July 1 to provide consulting services to Baker University (BU). The anticipated term of the contract is four months and the purpose of the contract is to achieve significant cost savings at the university. There is a stipulation in the contract that BU will pay Sherlock $38,000 at the end of each month, and if total cost savings reach a specific target, BU will pay an additional $33,000 to Sherlock at the end of the contract. Sherlock estimates a 80% chance that cost savings will reach the target. Note: Sherlock estimates variable consideration as the expected value. Required: Prepare the journal entry on July 31 to record the first month of revenue under the contract. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 10C

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