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Pepita Management Company entered into a 2-year contract to oversee leasing and maintenance for an apartment building on June 1, 2022. The contract starts on July 1, 2022. Under the terms of the contract, Pepita will be paid a fixed fee of $60,000 per year and will receive an additional 10% of the fixed fee at the end of each year provided that building occupancy exceeds 80%. Pepita estimates a 40% chance it will exceed the occupancy threshold, and concludes the revenue recognition over time is appropriate for this contract.

Assume Pepita estimates variable consideration as the most likely amount. How much revenue should Pepitas recognize on this contract in 2022? Explain your answer.

Sancocho Company sells restaurants franchises. Sancocho receives $100,000 from a new franchisee for providing initial training, equipment, and furnishings that together have a stand- alone selling price of $100,000. Sancocho also receives $30,000 per year for use of the Sancocho name and for ongoing consulting services (starting on the date the franchise is purchased). Felicita Prez became a Sancocho franchisee on February 1, 2022, and on July 1, 2022 Felicita had completed training and was open for business. How much revenue in 2022 will Sancocho Company recognize for its arrangement with Felicita Prez?

Explain your answer.