On July 1, Wiggins Associates enters into a contract to provide consulting services to Pennsylvania University (PU). The contract is anticipated to last four months and is intended to achieve significant cost savings at the university. The contract stipulates that PU will pay Wiggins $27,000 at the end of each month, and, if total cost savings reach a specific target, PU will pay an additional $22,000 to Wiggins at the end of the contract. Wiggins estimates a 70% chance that cost savings will reach the target. Assume that Wiggins estimates variable consideration as the expected value. Required: Prepare the journal entry on July 31 to record the first month of revenue under the contract. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
On July 1, Wiggins Associates enters into a contract to provide consulting services to Pennsylvania University (PU). The contract is anticipated to last four months and is intended to achieve significant cost savings at the university. The contract stipulates that PU will pay Wiggins $27,000 at the end of each month, and, if total cost savings reach a specific target, PU will pay an additional $22,000 to Wiggins at the end of the contract. Wiggins estimates a 70% chance that cost savings will reach the target. Assume that Wiggins estimates variable consideration as the expected value. Required: Prepare the journal entry on July 31 to record the first month of revenue under the contract. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 13E: On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million....
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![On July 1, Wiggins Associates enters into a contract to provide consulting services to Pennsylvania University (PU). The contract is
anticipated to last four months and is intended to achieve significant cost savings at the university. The contract stipulates that PU will
pay Wiggins $27,000 at the end of each month, and, if total cost savings reach a specific target, PU will pay an additional $22,000 to
Wiggins at the end of the contract. Wiggins estimates a 70% chance that cost savings will reach the target.
Assume that Wiggins estimates variable consideration as the expected value.
Required:
Prepare the journal entry on July 31 to record the first month of revenue under the contract.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F79a9c2c1-a1d5-4073-9c88-cbcea791f242%2F1cc77644-f228-44c1-8b03-a67c7e60565c%2Fo4r47h_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On July 1, Wiggins Associates enters into a contract to provide consulting services to Pennsylvania University (PU). The contract is
anticipated to last four months and is intended to achieve significant cost savings at the university. The contract stipulates that PU will
pay Wiggins $27,000 at the end of each month, and, if total cost savings reach a specific target, PU will pay an additional $22,000 to
Wiggins at the end of the contract. Wiggins estimates a 70% chance that cost savings will reach the target.
Assume that Wiggins estimates variable consideration as the expected value.
Required:
Prepare the journal entry on July 31 to record the first month of revenue under the contract.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
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