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.

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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