Questions 4 and 5 are about the same contract. For question 4, use just the information in this question.

Leghorn Company makes miniature foghorns for hobbyists who make authentic lighthouse models. Leghorn sells the foghorns to BISB, a hobby shop. Leghorn and BISB negotiate a contract for 1,000 foghorns at a base price of $40 each.

As part of the contract with Leghorn, BISB can earn a discount on the $40 base price: for every 100 foghorns that BISB customers purchase by Memorial Day (5/29/2023), the base price is reduced by $0.25 per foghorn for all 1,000 foghorns. (So, for example, if BISB customers purchase 200 foghorns by 5/29, BISB would pay Leghorn $40 [2 x $0.25] = $39.50 each for all 1,000 foghorns.) BISB will pay the amount due for all 1,000 foghorns on 5/31/2023.

Leghorn ships the Foghorns to BISB on 4/30/2023. On this date Leghorn management estimates:

• A 25% chance that BISB customers purchase 300 foghorns by 5/29;
• A 40% chance that BISB customers purchase 200 foghorns by 5/29; and
• A 35% chance that BISB customers purchase 100 foghorns by 5/29.

Compute the amount of sales revenue that Leghorn should record on 4/30/2023. Show your work.

Question 5

For this question, use the information from question 4 and the following information.

BISB customers purchase 300 foghorns by 5/29/2023. BISB informs Leghorn of this volume when it pays Leghorn on 5/31/2023.

5. Show the entry that Leghorn should make when it receives the payment and information from BISB on 5/31/2023. Show your work.