On January 2, 2019, TI enters into a contract with Drewry Corp. to build a new piece of equipment. The contract price is $3 million, and construction is expected to take 18 months. Drewry is billed and pays $1,500,000 of the contract price on January 2, 2019, and will pay the balance at completion.

TI estimates that the cost of construction will be $2.2 million.

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 $300,000 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, IT 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 $1,760,000 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 $2,200,000.

Required:

1.	Identify the performance obligations in the contract.
2.	Provide the journal entries that TI should make to recognize revenue from the contract.

Please use titles from the chart of accounts

CHART OF ACCOUNTS

Drewry Corp.General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
155	Construction in Progress
156	Partial Billings
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Construction Expenses
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Thanks!