On April 1st, 2020 Lionel Company enters into a contract with Storybook Inc. to sell $40,000 of goods with a delivery date on October 5th, 2020. Lionel manufactured the goods at a cost of $21,000 and uses perpetual inventory costing system. On the date when the contract is signed Storybook pays Lionel $15,000. Lionel delivers the goods on October 5, 2020, and Lionel pays the remaining portion of the payment on that date. Please answer the following questions.

1. Solve this problem by walking through each step of 5-step revenue recognition model by referring to the information given in the problem.

2. Prepare Lionel’s journal entries related to the contract with Storybook