Both account receivables are wrong.
Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketing strategy to compete with Burger King. The contract spans eight months. Burger Boy promises to pay $54,000 at the end of each month. At the end of the contract, Velocity either will give Burger Boy a refund of $18,000 or will be entitled to an additional $18,000 bonus, depending on whether sales at Burger Boy at year-end have increased to a target level. At the inception of the contract, Velocity estimates an 80% chance that it will earn the $18,000 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 Velocity revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Velocity receives the additional consideration of $18,000. 23 6.07/6.66 points awarded Required: 1. to 4. Prepare the journal entries related to the contract. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Scored Transaction General Journal Debit Credit No Accounts receivable 54,000 1 1 Bonus receivable 1,350 Service revenue 55,350 3,600 2 Service revenue Bonus receivable 3,600 3 3 Accounts receivable 54,000 450 Bonus receivable 54,450 Service revenue Cash 18,000 4 Bonus receivable 3,600 Service revenue 14,400 Journal entry worksheet 3 4 2 1 Record the entry to record revenue each month for the first four months of the contract Note: Enter debits before credits. Transaction General Journal Debit Credit 1 54,000 Bonus receivable 1,350 Service revenue 55,350 Record entry Clear entry View general journal Journal entry worksheet 2 4 Record the entry to record revenue each month for the second four months of the contract. Note: Enter debits before credits. General Journal Transaction Debit Credit Accounts receivable 54,000 Bonus receivable 450 Service revenue 54,450 Record entry Clear entry View general journal Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketing strategy to compete with Burger King. The contract spans eight months. Burger Boy promises to pay $54,000 at the end of each month. At the end of the contract, Velocity either will give Burger Boy a refund of $18,000 or will be entitled to an additional $18,000 bonus, depending on whether sales at Burger Boy at year-end have increased to a target level. At the inception of the contract, Velocity estimates an 80% chance that it will earn the $18,000 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 Velocity revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Velocity receives the additional consideration of $18,000. 23 6.07/6.66 points awarded Required: 1. to 4. Prepare the journal entries related to the contract. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Scored Transaction General Journal Debit Credit No Accounts receivable 54,000 1 1 Bonus receivable 1,350 Service revenue 55,350 3,600 2 Service revenue Bonus receivable 3,600 3 3 Accounts receivable 54,000 450 Bonus receivable 54,450 Service revenue Cash 18,000 4 Bonus receivable 3,600 Service revenue 14,400 Journal entry worksheet 3 4 2 1 Record the entry to record revenue each month for the first four months of the contract Note: Enter debits before credits. Transaction General Journal Debit Credit 1 54,000 Bonus receivable 1,350 Service revenue 55,350 Record entry Clear entry View general journal Journal entry worksheet 2 4 Record the entry to record revenue each month for the second four months of the contract. Note: Enter debits before credits. General Journal Transaction Debit Credit Accounts receivable 54,000 Bonus receivable 450 Service revenue 54,450 Record entry Clear entry View general journal
