On January $2,2019,$ TI enters into a contract with Drewry Corp. to build a new piece of equipment. The contract price is $$3,200,000,$ and construction is expected to take $18$ months. Drewry is billed and pays $$1,600,000$ of the contract price on January $2,2019,$ and will pay the balance at completion.

TI estimates that the cost of construction will be $$2,300,000.$

Drewry includes two performance bonuses in the contact:

$$ U$.$S$.$ Bonus: If the equipment design receives a U$.$S$.$ patent by March $15,2020,$ Drewry will pay a $$200,000$ bonus.

$$ International Bonus: If the equipment receives approval for international distribution by January $31,2020,$ Drewry will pay a $$1,000,000$ bonus.

The bonuses are payable when a U$.$S$.$ patent is approved and when international distribution is approved.

On the date the contract is signed, TI estimates that there is an $80\%$ chance it will receive U$.$S$.$ patent protection by March $15,2020,$ but only a $30\%$ chance that the equipment will be approved for international distribution.

TI received a U$.$S$.$ patent on the equipment design on November $15,2019,$ and immediately billed Drewry and received its bonus payment. On December $31,2019,$ TI has incurred $$1,840,000$ of contract costs and is $80\%$ complete. TI won approval for international distribution on January $15,2020,$ and completed the equipment project on April $15,2020,$ at a cost of $$2,300,000.$

Required:

$1.$ Identify the performance obligations in the contract.

$2.$ Provide the journal entries that TI should make to recognize revenue from the contract.