Boston Consulting enters into a contract to help Pepsi design a marketing plan to sell beverages. The contract is for eight months. Pepsi promises to pay $75,000 at the end of each month. At the end of the contract, Boston Consulting either will give Pepsi a refund of $25,000 or will be entitled to an additional $25,000 bonus, depending on whether sales at Pepsi at year-end have increased to a target level. At the beginning of the contract, Boston estimates an 80% chance that it will earn the $25,000 bonus and calculates the contract price based on the expected value of future payments to be received. At the start of the fifth month, circumstances change, and Boston revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Boston receives the additional consideration of $25,000. Required: 1. to 4. Prepare the journal entries related to the contract.

1.Record the entry to record revenue each month for the first four months of the contract.

2.Record the entry at the start of fifth month, to recognize the change in estimate associated with the reduced likelihood that the $25,000 bonus will be received.

3.Record the entry to record revenue each month for the second four months of the contract.

4.Record the entry after eight months to record receipt of the $25,000 bonus.