Pita Palace sells fast$-$food franchises. Pita Palace receives $$75,000$ from a new franchisee for

providing initial training, equipment and furnishings that together have a stand$-$alone selling

price of $$75,000.$ Pita Palace also receives $$36,000$ per year for use of the Pita Palace name and

ongoing consulting services $($beginning on the date the franchise was purchased$).$ Raphael

became a Pita Palace franchisee on May $1,20\backslash$times $1.$

a$.$ How many performance obligations?

b$.$ How much revenue will Pita Palace recognize in $201$ from its arrangement with

Raphael?

On January $1203,$ Fatima's Financial Consulting entered into a contract to complete a cost

reduction program for Eve's Orchard Supplies for $$20,000$ per month for the six$-$month period

between January and July $20\backslash$times $3.$ Eve paid Fatima the entire base$-$amount of the contract

$($$$120,000)$ on January $1,$ which Fatima correctly recorded. In addition, under the terms of the

contract, if total cost savings reach a specific target, Fatima will receive an additional $$10,000$ at

the end of the contract, but if total cost savings do not meet that target, Fatima must pay a

$$10,000$ penalty to Eve. Fatima estimates an $80\%$ chance that cost savings will reach the target

and calculates the contract price based on the expected value of future payments to be received.

a$.$ Calculate the expected value of any bonus.

b$.$ Prepare the journal entry that Fatima would record each month between January and July.

c$.$ Prepare the journal entry that Fatima would record at the end of the contract presuming the target was met.

d$.$ Prepare the journal entry that Fatima would record at the end of the contract presuming the target was NOT met.