On January 1, Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a six-month period. Revis will receive $68,000 from Green at the end of each month. If total cost savings reach a specific target, Revis will receive an additional $34,000 from Green at the end of the contract, but if total cost savings fall short, Revis will refund $34,000 to Green. Revis estimates an 80% chance that cost savings will reach the target and calculates the contract price based on the expected value of Future payments to be received. Required: Prepare the following journal entries for Revis: 1. Prepare the journal entry on January 31 to record the collection of cash and recognition of the first month's revenue. 2. Assuming total cost savings exceed target, prepare the journal entry on June 30 to record receipt of the bonus. 3. Assuming total cost savings fall short of target, prepare the journal entry on June 30 to record payment of the penalty. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list View journal entry worksheet

On January 1, Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a six-month period. Revis will receive $68,000 from Green at the end of each month. If total cost savings reach a specific target, Revis will receive an additional $34,000 from Green at the end of the contract, but if total cost savings fall short, Revis will refund $34,000 to Green. Revis estimates an 80% chance that cost savings will reach the target and calculates the contract price based on the expected value of Future payments to be received. Required: Prepare the following journal entries for Revis: 1. Prepare the journal entry on January 31 to record the collection of cash and recognition of the first month's revenue. 2. Assuming total cost savings exceed target, prepare the journal entry on June 30 to record receipt of the bonus. 3. Assuming total cost savings fall short of target, prepare the journal entry on June 30 to record payment of the penalty. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list View journal entry worksheet

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 1, Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a six-month
period. Revis will receive $68,000 from Green at the end of each month. If total cost savings reach a specific target, Revis will receive
an additional $34,000 from Green at the end of the contract, but if total cost savings fall short, Revis will refund $34,000 to Green.
Revis estimates an 80% chance that cost savings will reach the target and calculates the contract price based on the expected value of
future payments to be received.
Required:
Prepare the following journal entries for Revis:
1. Prepare the journal entry on January 31 to record the collection of cash and recognition of the first month's revenue.
2. Assuming total cost savings exceed target, prepare the journal entry on June 30 to record receipt of the bonus.
3. Assuming total cost savings fall short of target, prepare the journal entry on June 30 to record payment of the penalty.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
View transaction list
No
1
View journal entry worksheet
Date
January 31
Cash
Bonus receivable
General Journal
Debit
68,000
Credit
34,000

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