Problem $6-5($Algo$)$ Variable consideration $[$LO$6-3,6-6]$ Journal entry worksheet

Record the payment of penalty assuming that total cost savings fall short of

target.

Note: Enter debits before credits.

On 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 $$65,600$ from Green at the end of each month. If total cost savings reach a specific target, Revis will receive

an additional $$32,800$ from Green at the end of the contract, but if total cost savings fall short, Revis will refund $$32,800$ 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 month's 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.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

Journal entry worksheet

Record the collection of cash and recognition of the first month's revenue.

Note: Enter debits before credits.Problem $6\mathrm{.}5($Algo$)$ Variable consideration $[$LO$6-3,6-6]$

On 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 $$65,600$ from Green at the end of each month. If total cost savings reach a specific target, Revis will receive

an additional $$32,800$ from Green at the end of the contract, but if total cost savings fall short, Revis will refund $$32,800$ 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 month's 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.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

Journal entry worksheet

Record the receipt of the bonus assuming total cost savings exceed target.

Note: Enter debits before credits.