Adept Advertising Agency (AAA) is a marketing company that offers a variety of marketing offerings to its customers. Specifically:

• AAA will create a TV commercial for $1M, build an app for $500K, and build a Facebook page for $250K. These amounts represent AAAs charges for these items when AAA sells them separately to customers. The TV commercial, the app, and the Facebook page are not interrelated; that is, each functions independently of the other offerings.
• If a customer purchases all aforementioned items together, the total amount owed to AAA is $1.5M. Payment terms are 50 percent consideration due at contract signing, with the remaining 50 percent due over the rest of the development period (25 percent at mid- point, 25 percent at completion).
• If the app is downloaded 500K times or more in the first month, there is a one-time bonus of $250K payable to AAA.

Marshall, a customer, approaches AAA with the hopes of reinventing its image to a younger customer base. Marshall has a verbal agreement with AAA that is based on AAAs unsigned quote to Marshall on November 30, 2021, for one TV commercial, one app, and a Facebook page for total consideration of $1.5M and payment terms noted above. The agreement creates enforceable rights and obligations pursuant to AAAs customary business practices. None of these items can be redirected by AAA to another customer. AAA performed a credit check on Marshall and has determined that Marshall has the intention and ability to pay AAA for fulfilling its portion of the contract. Marshall is required to pay AAA for performance completed to date if Marshall cancels the contract with AAA for reasons other than AAAs failure to perform under the contract as promised.

Marshall makes a payment on November 30, 2021, in the amount of $750K (50% of total consideration of $1.5M) pursuant to the agreement. From the date of the quote, it takes AAA six months to develop and produce the TV commercial, two weeks to complete the Facebook page, and three months to complete a fully functioning app. AAA does not think that the app will be downloaded 500K times in the first month because Marshalls customer base does not quickly accept newly developed technology. On the basis of its experience with similar technology, AAA has determined that it takes over three months for Marshalls users to begin to download its apps

1-how much revenue should be recognized and when? Show the required journal entries

2-Assuming all items are completed in the expected time frame (6 months for the commercial, 2 weeks for the Facebook page, and 3 months for the app), how much revenue will be recognized each month over the life of the agreement

3- How would your conclusions change if: a. The app sold to Marshall is actually downloaded more than 500K times in the first month? b. AAA believed at the outset that there is about a 75 percent chance that the app will be downloaded more than 500K times and it is probable that there will not be a significant reversal of revenue?