On February 1, Harvey Incorporated entered into a contract to provide consulting services to Lesch Company. The
Question:
On February 1, Harvey Incorporated entered into a contract to provide consulting services to Lesch Company. The contract is anticipated to last 6 months and is intended to achieve significant cost savings for Lesch. Lesch pays $350,000 to Harvey at the beginning of the contract and will pay an additional $80,000 on December 31 if total cost savings reach a specific target. Harvey estimates an 80% chance that cost savings will reach the target. Harvey estimates variable consideration as the most likely amount.
Prepare Harvey's journal entry at the inception of the contract on February 1
Prepare Harvey's journal entry at the end of the first month (February 28)
Prepare Harvey's journal entry on December 31, assuming Lesch 's total savings exceed the target
Prepare Harvey's journal entry on December 31, assuming Lesch 's total savings do not exceed the target
Auditing Cases An Interactive Learning Approach
ISBN: 978-0132423502
4th Edition
Authors: Steven M Glover, Douglas F Prawitt