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On January 1 , Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a six - month period.
On January Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a sixmonth period. Revis will receive $ from Green at the end of each month. If total cost savings reach a specific target, Revis will receive an additional $ from Green at the end of the contract, but if total cost savings fall short, Revis will refund $ to Green. Revis estimates an chance that cost savings will reach the target and calculates the contract price based on the expected value of future payments to be received. Required: Prepare the following journal entries for Revis: Prepare the journal entry on January to record the collection of cash and recognition of the first month's revenue. Assuming total cost savings exceed target, prepare the journal entry on June to record receipt of the bonus. Assuming total cost savings fall short of target, prepare the journal entry on June to record payment of the penalty.
On January Revis Consulting entered into a contract to complete a cost reduction program for Green Financial over a sixmonth period. Revis will receive $ from Green at the end of each month. If total cost savings reach a specific target, Revis will receive an additional $ from Green at the end of the contract, but if total cost savings fall short, Revis will refund $ to Green.
Revis estimates an chance that cost savings will reach the target and calculates the contract price based on the expected value of future payments to be received.
Required:
Prepare the following journal entries for Revis:
Prepare the journal entry on January to record the collection of cash and recognition of the first month's revenue.
Assuming total cost savings exceed target, prepare the journal entry on June to record receipt of the bonus.
Assuming total cost savings fall short of target, prepare the journal entry on June to record payment of the penalty.
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