Terra Bus Transportation provides on-campus bus services for universities. On January 1, it enters into a one-year contract with Moose University to operate five bus lines traveling throughout the campus. Under the contract, Terra will be paid $100,000 on the last day of each month. In addition, Terra will receive an additional $120,000 at the end of each six-month period, provided it remains free of accidents. . On January 1, based on historical experience, Terra estimated that there is a 75% chance that it will remain free of accidents for the entire year. . On March 20, three of the most senior drivers at Terra abruptly left. As a result, Terra had to hire inexperienced drivers to fill the vacant positions. Consequently, Terra revised its estimate to a 30% chance that it would be entitled to receive the semiannual bonus and decided to continue this 30% probability estimate until its six-month review at the end of June. On June 30, Moose confirmed that there was no accident between January and June, so Terra would be entitled to the semiannual bonus. Terra bases estimates of variable consideration on the expected value it expects to receive. Required: Prepare Terra's March 31 journal entry to record the revenue recognized from March 1 - March 31, as well as any appropriate adjustments to the revenue presumed already recorded from January 1 - February 28. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Terra Bus Transportation provides on-campus bus services for universities. On January 1, it enters into a one-year contract with Moose University to operate five bus lines traveling throughout the campus. Under the contract, Terra will be paid $100,000 on the last day of each month. In addition, Terra will receive an additional $120,000 at the end of each six-month period, provided it remains free of accidents. . On January 1, based on historical experience, Terra estimated that there is a 75% chance that it will remain free of accidents for the entire year. . On March 20, three of the most senior drivers at Terra abruptly left. As a result, Terra had to hire inexperienced drivers to fill the vacant positions. Consequently, Terra revised its estimate to a 30% chance that it would be entitled to receive the semiannual bonus and decided to continue this 30% probability estimate until its six-month review at the end of June. On June 30, Moose confirmed that there was no accident between January and June, so Terra would be entitled to the semiannual bonus. Terra bases estimates of variable consideration on the expected value it expects to receive. Required: Prepare Terra's March 31 journal entry to record the revenue recognized from March 1 - March 31, as well as any appropriate adjustments to the revenue presumed already recorded from January 1 - February 28. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Record the appropriate adjustment to the January and February revenue.
Transcribed Image Text:Journal entry worksheet
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Record the appropriate adjustment to the January and February revenue.
Transcribed Image Text:Terra Bus Transportation provides on-campus bus services for universities. On January 1, it enters into a one-year contract with Moose
University to operate five bus lines traveling throughout the campus. Under the contract, Terra will be paid $100,000 on the last day of
each month. In addition, Terra will receive an additional $120,000 at the end of each six-month period, provided it remains free of
accidents.
• On January 1, based on historical experience, Terra estimated that there is a 75% chance that it will remain free of accidents for the
entire year.
. On March 20, three of the most senior drivers at Terra abruptly left. As a result, Terra had to hire inexperienced drivers to fill the
vacant positions. Consequently, Terra revised its estimate to a 30% chance that it would be entitled to receive the semiannual
bonus and decided to continue this 30% probability estimate until its six-month review at the end of June.
• On June 30, Moose confirmed that there was no accident between January and June, so Terra would be entitled to the semiannual
bonus.
Terra bases estimates of variable consideration on the expected value it expects to receive.
Required:
Prepare Terra's March 31 journal entry to record the revenue recognized from March 1 - March 31, as well as any appropriate
adjustments to the revenue presumed already recorded from January 1- February 28.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
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