Leo Legal Services enters into a written contract to provide one month of legal service to J & J Home
Leo Legal Services enters into a written contract to provide one month of legal service to J & J Home Inspections. Leo tells J & J that he can do the work required for a fee of $5,000. At the end of the month, Leo concludes the work and sends appropriate reports to J & J along with an invoice for $5,000, n/30.
Using the five-step model for revenue recognition under the contract-based approach, answer the following questions:
a. What kind of contract does Leo Legal Services have with the customer?
b. What is Leo’s performance obligation?
c. What is the transaction price?
d. Should the transaction price be allocated? If so, how?
e. When should Leo recognize revenue from this contract?
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