Microsoft Word - Acctg 5110 Review Assignment #1

Use the following information to answer the next three questions.

Rooster Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Rooster. The contract specifies the service fee to be $15,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Rooster will receive an additional quarterly bonus of $3,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness.

• ? On April 1, based on historical experience, Rooster estimated that there is a 75% chance that it will earn the quarterly bonus.
• ? On May 5, Rooster learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Rooster revised its estimate downward to 40% that it would earn the quarterly bonus.
• ? On June 30, Swanky notified Rooster that, for the quarter ended, there were four complaints associated with room cleanliness, so Rooster would receive the bonus. Two days later, Rooster received all payments due for all services rendered in the second quarter, including the bonus Rooster estimates any variable consideration on the expected value of the consideration it expects to receive.

17. (1 point) Prepare the required journal entry for Rooster Services on April 30th. The entry includes:

a. A debit to accounts receivable of $15,750 b. A debit to bonus receivable of $3,000 c. A credit to service revenue of $18,000 d. A credit to bonus receivable of $1,500

e. A debit to bonus receivable of $2,250 f. Adebittobonusreceivableof$750 g. A credit to deferred revenue of $31,500 h. None of the above