Sanjeev enters into a contract offering variable consideration. The contract pays him $3,400/month for six months of continuous consulting services. In addition, there is a 60% chance the contract will pay an additional $4,400 and a 40% chance the contract will pay an additional $5,400, depending on the outcome of the consulting contract. Sanjeev concludes that this contract qualifies for revenue recognition over time.

Assume that Sanjeev estimates variable consideration as the most likely amount. After Sanjeev has recognized revenue for two months of the contract, he changes his assessment of the chance the contract will pay him $5,400 to 70%. What adjustment to revenue should Sanjeev recognize to account for that change in estimate?

Note: Round intermediate calculations to whole dollars.

Multiple Choice

Debit of $334

Credit of $334

Credit of $3,400

Debit of $3,400