Gourmand Dinner Box Inc. is a catering company that sells meal kits that its customers can take home and quickly prepare. The company sells its meal kits at local grocery stores and has recently begun to off er a monthly subscription service, which delivers meal kits to the customer’s home. Single meal kits can be purchased at grocery stores. Approximately 10% of the kits shipped to grocery stores each month are returned unsold and are then discarded. Gourmand charges the grocery stores $15 for each meal kit. In December 2020, Gourmand began selling three-month subscriptions for $900. Subscriptions are paid in advance and are non-cancellable. Gourmand sold 800 subscriptions on December 1, 2020 which entitle the subscriber to 15 meal kits each month beginning in December 2020. During December, 4,500 meal kits were sold, on account, to grocery stores and all required subscriber meals were delivered. Grocery stores have 30-day terms of payment with Gourmand.

Required

a. Determine how much revenue Gourmand Dinner Box would be able to recognize in December 2020. Use the five-step model for revenue recognition in preparing your response.

b. Based on your analysis in part “a,” prepare the required journal entries for the contract. Gourmand records adjusting journal entries monthly. Ignore any related costs to prepare the meal kits.