Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketing strategy to compete with Burger King. The contract spans eight months. Burger Boy promises to pay $48,000 at the beginning of each month. At the end of the contract, Velocity either will give Burger Boy a refund of $16,000 or will be entitled to an additional $16,000 bonus, depending on whether sales at Burger Boy at year-end have increased to a target level. At the inception of the contract, Velocity estimates an 80% chance that it will earn the $16,000 bonus and calculates the contract price based on the expected value of future payments to be received. After four months, circumstances change, and Velocity revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Velocity receives the additional consideration of $16,000.

Required: 1. to 4. Prepare the journal entries related to the contract.

a: Record the entry to record revenue each month for the first four months of the contract.

b: Record the entry after four months to recognize the change in estimate associated with the reduced likelihood that the $16,000 bonus will be received.

c: Record the entry to record revenue each month for the second four months of the contract.

d: Record the entry after eight months to record receipt of the $16,000 bonus.