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P 65 Variable considerationLO63, LO66On January 1, Revis Consulting entered into a contract...

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Accounting

P 65
Variable considerationLO63, LO66On January 1, Revis Consulting entered into a contract to
complete a cost reduction program for Green Financial over a
six-month period. Revis will receive $20,000 from Green at the end
of each month. If total cost savings reach a specific target, Revis
will receive an additional $10,000 from Green at the end of the
contract, but if total cost savings fall short, Revis will refund
$10,000 to Green. Revis 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.Required:Prepare the following journal entries for Revis:Prepare the journal entry on January 31 to record the collection
of cash and recognition of the first months revenue.Assuming total cost savings exceed target, prepare the journal
entry on June 30 to record receipt of the bonus.Assuming total cost savings fall short of target, prepare the
journal entry on June 30 to record payment of the penalty.

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