1. Sanjeev enters into a contract offering variable consideration. The contract pays him $1,000/month for six months of continuous consulting services. In addition, there is a 60% chance the contract will pay an additional $2,000 and a 40% chance the contract will pay an additional $3,000, 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 $3,000 to 70%. What adjustment to revenue should Sanjeev recognize to account for that change in estimate?

A) Debit of $1,000

B) Credit of $334

C) Credit of $1,000

D) Debit of $334

2.Co. began a construction project in 2021 with a contract price of $150 million to be received when the project is completed in 2023. During 2021, CO incurred $36 million of costs and estimates an additional $84 million of costs to complete the project. CO recognizes revenue over time and for this project recognizes revenue over time according to the percentage of the project that has been completed.

2. In 2022, CO incurred additional costs of $58.5 million and estimated an additional $40.5 million in costs to complete the project. CO:

A) Recognized $15 million gross profit on the project in 2022.

B) Recognized $13.5 million gross profit on the project in 2022.

C) Recognized $6 million gross profit on the project in 2022.

D) Recognized $1.5 million gross profit on the project in 2022.