Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketing strategy to competewith Burger King. The contract spans eight months. Burger Boy promises to pay $66,000 at the end of each month. At the end of thecontract. Velocity either will give Burger Boy a refund of $22,000 or will be entitled to an additional $22,000 bonus, depending onwhether 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 $22,000 bonus and calculates the contract price based on the expected value of future payments to bereceived. At the start of the fifth month, circumstances change, and Velocity revises to 60% its estimate of the probability that it willearn the bonus. At the end of the contract. Velocity receives the additional consideration of $22,000Required:1. Prepare the journal entry to record revenue at the end of each month for the first four months of the contract2. Prepare the journal entry that the Velocity Company would record at the start of the fifth month to recognize the change inestimate associated with the reduced likelihood that the $22,000 bonus will be received.3. Prepare the journal entry to record the revenue at the end of each month for the second four months of the contract.4. Prepare the journal entry after eight months to record receipt of the $22,000 cash bonus.Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.View transaction listJournal entry worksheet234Record the entry to record revenue at the end of each month for the first fourmonths of the contract.

1) Journal entry to record the revenue at the end of each month for the first four months of the…

Required: 1. Prepare the journal entry to record revenue at the end of each month for the first four months of the contract 2. Prepare the journal entry that the Velocity Company would record at the start of the fifth month to recognize the change in estimate associated with the reduced likelihood that the $22,000 bonus will be received. 3. Prepare the journal entry to record the revenue at the end of each month for the second four months of the contract. 4. Prepare the journal entry after eight months to record receipt of the $22,000 cash bonus.

Required: 1. Prepare the journal entry to record revenue at the end of each month for the first four months of the contract 2. Prepare the journal entry that the Velocity Company would record at the start of the fifth month to recognize the change in estimate associated with the reduced likelihood that the $22,000 bonus will be received. 3. Prepare the journal entry to record the revenue at the end of each month for the second four months of the contract. 4. Prepare the journal entry after eight months to record receipt of the $22,000 cash bonus.

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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